Managing any business is tough, but running a family owned business is even tougher. Internal conflicts, family matters, business concerns, and ownership transition make running the business very complicated, and often emotionally charged. In fact, according to the Small Business Administration, only 33% of family owned businesses survive the transition from first generation ownership to the next generation.
Causes of Conflict in a Family-Owned Business
The causes are usually the same – an inability to separate family from business needs, conflicts of interests, expressions of “entitlement,” differences of opinion in how the business should be managed, intense rivalries, and, of course, the egos that come into play. In addition, there are instances where the second and third generation often has less appreciation for what their predecessors did to make the business a success. Some don’t have the same drive, commitment or business savvy. Below are three real world case-studies.
Case #1: The president of a successful equipment distribution business decided to turn his business over to his son. The president was a smart businessman. He was well liked by his customers, employees and suppliers. Even though his son had worked in the business for almost fifteen years, he lacked sophistication and didn’t know how to develop strong employee and customer relationships. Once, when the president was suddenly hospitalized, the son was lost. He wasn’t sure what to do first. As a result, employees gained little confidence in him. They are worried that the company will fall apart when the president turns the business over to him. While they talk about the situation with each other, they are not comfortable sharing their feelings with the president.
Case #2 The founder of a popular restaurant figured it was time to turn her business over to her son and retire…or so she thought. Putting her son in charge, she took some time off. She stopped in a few weeks later to see how things were going. Unbeknownst to her, the day of her visit was his day off. She saw several things that needed immediate attention. She asked a staff member to call her son and tell him to come right away.
The assistant manager hesitated saying, ” I can’t do that. Bob told us never to call him for any reason on his golf day off .” Like most entrepreneurs, the owner had worked sixteen-hour days for years to keep her business up and running. A lot of blood, sweat, and tears went into making it a success, and now her son was letting it all go.
She also discovered that he did not treat her employees well, nor did he share her vision of opening more restaurants based on this successful model. The result was a frustrated staff and a business in jeopardy. She was a very unhappy woman who did not feel she could retire in peace.She now has to go in on a regular basis and work hard to make sure her business will survive until her son is responsible enough to be given this opportunity.
Case #3 The owner of a well-established and highly profitable construction company turned the business over to his two sons and his daughter. All three had been brought up in the business and were highly capable. The eldest brother was made president; the second son was appointed vice president; the daughter headed up marketing.
The brothers did not see eye to eye on anything and fought over every decision. Finally, the younger brother left the family business and started his own competitive company in the same town. The result? Although both companies are still in business, the parents are brokenhearted, and the brothers have not spoken to each other in years.
These examples are all negative. Of course, there are many family -owned businesses that are doing it right.
Family owned businesses do not need to have these problems.
I have worked with an abundance of progressive family owned business owners who have practices in place to ensure all employees are happy and that future generations will be able to enjoy the business and benefit from its continued growth and profitability. A dealer I’ve worked with in Ohio cones to mind. The company is highly profitable, and both customers and employees are happy. So is their President, who is ready to retire soon. While working with their company, he stated, “One of the reasons this company is running so well is because my nephew is the GM. People absolutely love him and so do I. The reason is that he has the same work ethic I have, and knows the business inside out. I’ve sent him to numerous leadership training programs too. He’s ready to take the helm.”
TIPS TO AVOID THE FAMILY-OWNED BUSINESS BLUES
Share Vision and Values – To achieve success as a family owned business, every family member should share the same vision of the business in the future. If one person wants to keep it small and another wants to build an empire, it won’t work. If one person just wants to make a living and another wants to make a fortune, that’s another type of problem. If family members do not share the vision of the founder or top executive, they have to be comfortable enough to express their feelings. Ultimately, everyone must be on the same page to avoid constant conflict.
Core values are the beliefs and principles that guide individual behavior and form the foundation upon which your family and business should operate. The family should discuss the company’s core values and agree to how they will demonstrate them. Honesty, integrity, respect, teamwork, excellence, customer focus, health, safety and family relationships should be among every company’s core values.
Set Clear Roles and Responsibilities
In many family owned businesses (especially those that are start-ups), everyone does a little of everything. Whether yours is a new business or one that is well established, family members’ job roles and responsibilities have to be clearly defined. Expectations should be set with clear agreement what each member will be accountable for.
Manage the Family Owned Business Like Any Other Business.
Many family owned businesses operate with an informal management style. There may also be disparity in how each member leads. This can frustrate employees, inhibit the growth and profitability of the business, and prevent it from reaching its true potential. Every manager in the organization should lead in the same way, setting high standards for performance and being an example for others on staff.
Make sure someone can step right into your place, and the company can operate at full capacity if you should have an accident or suddenly become ill. Systems and procedures should be in established. Someone should also have access to the books. In addition, other family members and employees should be cross-trained.
Avoid the Kiss of Death in Your Family-Owned Business – Maintaining the Status Quo. Challenge it!
Maintaining the status quo is the kiss of death for any business. Efforts must be made to ensure the delivery of superior customer service and new ways of doing businesses must be considered. Some family owned business owners unknowingly try to preserve the status quo. This is especially true if new ideas are proposed by a family member or younger employee. A common phrase is “We’ve always done it this way.” The owner is more comfortable doing things the same way because that is how he or she gained success. But these attitudes can frustrate employees and can hamper business efforts in a contemporary world.
Avoid and Manage Conflict
No business or family is perfect. But if there is conflict and feuding among family members, it will be impossible to establish a positive work environment. A dispute between family members will impede high levels of teamwork and customer service.
Most problems can be worked out, worked through, and resolved. If everyone is open to finding a solution, they will have to manage their emotions and maintain respect for each other. They must also be willing to be flexible…perhaps even meet each other half way without being too aggressive or demanding. Some may have to change dramatically.
It’s not about who is to blame or who is right. The bottom line is that conflict can be resolved by agreeing to do what is in the best interest of the business. If that can’t happen, the business owner should consider bringing in an outside arbitrator or trusted business consultant to help work out the issues.
Establish Healthy Boundaries
If you are a husband and wife team, set, agree, and adhere to boundaries. There need to be limits that the business “needs” cannot cross. For example, don’t discuss business after 6:00 pm or at home. Go to dinner but do not talk about business. If you are at a family event, do not discuss business for more than fifteen minutes. It is not fair to your family. By all means, refrain from arguing in the workplace. It makes everyone uncomfortable.
Don’t Alienate Employees
Don’t create two types of employees-family vs. non-family. Conduct performance reviews for family and non-family employees alike. Refrain from showing favoritism or giving special treatment to family members. For example, if a family member borrows a company vehicle, make sure other employees have access to that vehicle as well.
Avoid alienating employees by practicing nepotism. Hire, promote, and pay people based only on their actual merits, abilities, and contributions to the business. If you don’t, the non-family employees will lose their motivation. They may feel like a promotion is out of their reach because they aren’t a family member or a friend of the family. They may also become jealous and resentful.
Refrain from passing off personal expenses as business expenditures for a family member. If you purchase company cars, purchase mid-sized cars that are fuel-efficient. Do not allow family members to use the company credit card for dinners with their families. Don’t put family members on the payroll if they’re not making a real contribution to the business.
Create a Culture of Open Communication
Effective communication with all members of the organization is critical. Non-family employees shouldn’t feel like family members are more ‘in the know’ about what is happening with the business. Establish a culture of open communication where everyone is well informed on what’s going on and on plans for the future.
If you plan on hiring a family member or retiring in the near future and turning the business over to someone in the family, let your staff know. If you are the person who will run the company, hold a meeting. Let employees know you may run the company a bit differently, but that you are going to do your absolute best to make it a great place to come to work each day. Keep in mind that they may be in fear of losing their jobs. Let them know you do not plan on making any changes in staff or eliminating jobs if that is in your plan. Ask employees what they recommend and what they would like to improve upon once you take over.
Involve employees in decision-making and idea sharing. Ask for their ideas on how to improve customer service, teamwork, communication and productivity. Provide feedback on their ideas and implement the best.
Make Employees Feel Like Family
Treat all of your employees as well as you treat your best customers. Make your employees feel they are working with you and not for you. Hold employee appreciation events and annual picnics. Include employees’ families at these events. Take a different employee to lunch once a week. Provide unexpected bonuses when you have a great Quarter, or yearly bonuses.
Create a Succession Plan
Sooner or later, you will retire. If there is not a succession plan in place, you are setting your business up for failure. Be prepared with a succession plan to ensure your business lives on long after you are gone.
Part of that plan is to prepare your successor for the position. Most likely, it will be a family member who is already working in the business for several years. Ideally, he or she will possess interpersonal and relationship building skills.
If your successor does not have a degree in business, enroll them in a course on Business 101. Make sure they understand how to read financial statements and fully comprehend that
“Revenue is Really Nice. Profit Is What Matters.”
The more business and financial acumen your successor possesses, and the more they know the business, your industry, and your customers, the better. If they are well liked and respected by your staff, all the better.
In addition, provide training to help them to excel in the five essential facets of leadership:
Determine Whether You Will Benefit by Hiring a Family-Owned Business Consultant and Hands-On Workshop Facilitator
Consider hiring a consultant or coach for a six-month period to work with your successor. An experienced professional can help your successor identify his or her strengths, help to build on them, and also identify areas for where improvement is needed. They can also help train your entire team on teamwork, customer service,and internal customer service, and facilitate a discussion on how to improve communication and morale. Great results can be obtained, if the owners/executive team, managers, family employees, and all employees display the behaviors they agree to adhere to after the consultant’s work is completed.
As a Family Owned Business Executive – Ask Yourself This Question:
Creating a succession plan and implementing smart family-owned business practices involves a great deal more. For now, look at your business through the eyes of your entire workforce and answer this question honestly:
“If you worked at your family owned business, would you want to work for YOU?”
Need a consultant with family owned business experience to assist you in these areas? Call now: (847) 477-7376 or email cc@christinespeaks.com
About Christine Corelli
