Building a successful family business can be one of the most rewarding experiences of your life, or it can be one of the most frustrating. Many times it is both, often on the same day. It is a unique situation, which comes with unique challenges. When it is going well it can bring family members closer, and give them a good life. When it is not going well it can damage or destroy families, and leave them financially insecure.
Do not let that happen to your company or family. Here are 4 ways to run a successful family business.
Keep it structured
Family businesses are usually run informally, and this is where the problems start. If anything they should have more checks and balances than the typical business, not less. When – not if – a family member starts taking advantage you want to address the behavior immediately. Clearly written policies, metrics and procedures should already be in place.
When someone knows what his duties and responsibilities are, and has agreed to be held accountable for them, it is more difficult for him to develop hard feelings. Metrics are facts, not feelings – solid numbers reduce misunderstandings and conflicts.
Control power struggles
On-going power struggles are common in family companies, usually going back to childhood. Be rigid and vigilant about keeping family drama out of the workplace, and workplace drama out of family life. Take as much of the emotion out of decision making as possible.
Develop a clear chain of command and follow it. Decide who is in charge of which area and leave them alone to do their job. The metrics will show, in a non-emotional way, who is doing a good job and who is not.
Everybody pulls their weight
Commit to running a business, not a charity. Everybody works and gets paid fair market value for the work they produce. They should have a job description, clear duties/responsibilities and get yearly, formal performance reviews.
One of the reasons family businesses fail is that there are too many non-producing members on the payroll. It is simple math – overpaying family to do less work than an unrelated employee can be the difference between profit or loss. If you want to provide financial rewards to family then do them and your bottom line a favor, tie it to performance. No free rides.
Have a succession plan
A succession plan is important in any company, but it is doubly so in a family company. Most do not survive into the second generation. One of the main reasons is lack of a succession plan. Planning for succession is difficult for owners, most just avoid it. Their belief that “It’ll all work out.” is naÃ¯ve and commonly wrong.
A successful plan starts years in advance of retirement. It covers 3 main areas: operational leadership/management, financial/wealth and family issues/interpersonal. Each section is equally important and may require outside help to navigate it. Families often respond better to a neutral party.
Strong families and family businesses are the backbone of our country. They are what built it and they are what will keep it strong. Make sure both your company and your family have all the tools they need to survive the challenges of working together.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: