Family Owned Businesses Require Special Relationships


TBA.06.02.16Family owned businesses come with their own special set challenges requiring a different set of rules to preserve the business relationship as well as the family relationship.

The classic family business often starts out requiring “all hands on deck,” in many cases, just to survive. Most of the challenges occur as the family business grows, and the needs go beyond physical labor and get into the professional skill sets as well. A family member may be capable of, say, doing the accounting in the early days when the business was relatively simple, but as the business grows, their lack of education in computer skills, cost accounting, and fiscal management can actually hold the business back.

This is true with any skill set as the demand for more complexity is required to cope with, and stay on top of, the challenges of growth.

Now comes the question. Can you “fire” mom? Or dad? Before you let your family business get to this awkward point, try to avoid the issue for the family’s sake. When you start out, have a clear understanding that each member can only go so far in the company without improving his or her skills, or they must consider stepping aside to become say, a board member.  You can still be an owner in the business while someone more qualified sees to the nitty gritty.

Here’s are the major challenges – and solutions – we have witnessed in family businesses:

Jobs Assignments. Typically, what happens in a family business is that family members feel obligated to put their relatives in various positions, the ones for which they appear most qualified … at the time. We have a client whose business is set up just this way. Dad is the President and CEO, Mom does the books and pays the bills, Son is the manager, Daughter does the marketing person, and Son-in-Law does the sales. After many years of stagnation, they finally agreed to hire a professional accountant with multiple program skills, and finally agreed to hire professional sales managers. Their business began to grow again.

Grudges. Aside from the ‘peter principle’ of rising to the level of incompetence, another factor plagues family businesses. You are so close to your relatives that any criticism, no matter how positive, can be taken personally and added to ongoing life frictions existing since childhood. There is a tenancy to remind the critic that they aren’t so perfect themselves, and the situation can quickly degenerate into a family squabble. The key here is to have everyone commit to the premise that the business (and the customer) comes first, and that everyone has an interest in providing the ideal customer experience.

Voting. In most family business, everybody get a vote. The problems occur when some members are not as qualified to make judgements as others, but their vote counts the same ass the qualified members because they are, after all, part of the family. And it gets more complicated and politics come into play when the family begins to grow and the kids get a vote, too. This is why it’s critical for family businesses to identify certain areas where only the most qualified members can vote, leaving some issues to outside experts to advise them. The key here is the survival and growth of the business the entire family relies upon, not on any family member or who gets to vote.

So when it comes to successful family business, it’s not necessarily, “all in the family!” Often both family and business relationships improve with the competent assistance of more qualified and experienced professionals from outside the family.