What’s Love Got to Do with It? How Family Ties Can Harm a Family BusinessBondBeebe
Posting by Joel C. Susco, CPA
Every business experiences challenges now and then, but family owned and operated businesses can be particularly challenging to navigate successfully and smoothly. Working with family members can be a very enjoyable experience, but if management falls into some common mistakes, it could pose some specific business risks that, if not properly addressed and resolved, could result in negative consequences to your business and family dynamics, as well as your bottom line.
Here are five common missteps that can harm a family business, along with some advice on how to manage certain situations and keep your business and family relationships healthy.
- Forgo the Family Feud. Arguments with family members when making key strategic business decisions can be dangerous to the health of the business. Conflicts often arise from the inability to separate business and personal lives, and usually it’s due to individuals’ egos and varied interests, as well as sibling rivalry. Remedy: No matter what the issue, it’s best to remind your family members of the common business goals, so that you can move past your disagreements and work together as one whole team.
- Don’t Play Favorites. Overseeing family members can be a difficult matter. You may feel inclined to give them special treatment or company perks, but this is a big no-no. It’s important not to show favoritism. All of your employees, family or not, should be treated equally across the company. Remedy: Make sure your reasons for hiring, promoting and terminating employment are based on actual job performance, not because of your relationship to the employee.
- Manage Emotions and Expectations. While not an easy feat, especially if you are directly supervising family members, it is imperative to manage emotions and expectations. While understand that emotions will enter your decision-making processes, n emotionally charged environment can make day-to-day management operations challenging. Remedy: Be compassionate and understanding toward others’ feelings, but share your point of view. Communicate your expectations and manage theirs to create a productive, team-oriented environment in which everyone has the company’s best interests in mind.
- Communicate Effectively. While it’s easy to get in the habit of casually communicating information to your family employees, this can turn into a “he said, she said” scenario very quickly. The secrets to success are effective company-wide communication, so it is critical to have structure in place. Remedy: Create a written internal protocol and hold regularly scheduled meetings to address and resolve any important operational business issues before they get out of hand. Consider the need for periodic meetings of family members where everyone can share in communicating relevant information about the business.
- Create a Succession Plan. The sustainable future of a business relies on having a carefully prepared succession plan. According to the Small Business Administration, 40 percent of U.S. businesses face the transfer of ownership issue at any given time, and less than one third of family businesses survive the transition from first to second generation ownership. If you want to retire someday, or if something should happen where you cannot continue to run your company, it’s critical to have a succession plan so that the business can continue from generation to generation. Remedy: Create a succession plan before you need one, and review it on a regular basis to integrate changes regarding the business or individuals.
Keep in mind that your business is only as strong as your employees. Dedicate yourself to maintaining a healthy work environment by effectively communicating company goals and plans. Strengthen your ties with your family members by treating them fairly and appropriately, and make sure they are on the same page as you are when it comes to making key decisions. This will put you on the right path to ensuring the future and vitality of the business.