Family businesses make up the majority of the world’s wealth; thus, their influence is vast. In the US alone, the 5.5 million family businesses make up 57 percent of the country’s GDP. They employ over 98 million people and are responsible for 78 percent of jobs created.
This proves that there’s a strong need to strengthen and even increase family businesses. However, the reality is that 30 percent of family businesses fail to pass the business to the second generation.
Although family businesses intend to pass the businesses to the succeeding generation, most don’t have a family business succession plan to support their goal. This contributes to the failure of business succession.
The good news is that there’s a way out of this failure. Read on to find out six tips that every family business needs to know.
1. Clarify Roles And Responsibilities Of Family Members
It’s best to clarify to your family member, who is also your employee, what their role and responsibilities are in the business. It’s not uncommon for family members to join the business with a mindset that they have the upper hand. Mainly because of their relationship with the business owner.
In most cases, this type of mentality makes them think they’d get away with it should they make a mistake. In some cases, they half-heartedly do their jobs which can decrease productivity.
Being unclear of your family member’s roles could lead to workplace conflict. Some family member employees might overstep their boundaries.
For instance, a family member might make decisions for a project. This is okay if that family member is the project manager. However, problems may arise if the project manager is a non-family member.
As such, discuss what they can do and the limits of their position. This will help lessen the chances of conflict in the workplace.
2. Anticipate Conflict And Plan How To Resolve Them
Work-related conflicts are bound to happen no matter how close you are to a family member. This is a common issue among family businesses where family members work hand-in-hand. As a result, some of your ideas will clash with their opinions, resulting in tension.
This is why employers should create a separate policy for the employment of relatives. Written policies that mention how to manage conflicts are key to good governance. Spell out the step-by-step procedures as well as who decided when a deadlock occurs.
This type of policy is also helpful in making fair decisions, especially when conflict appears between a relative and a non-relative employee. Since you have a policy, you have a valid reason to call out your family member when it’s found that they’re at fault.
3. Keep Family Issues Outside Business Management
What sets family-owned businesses apart is the integration of family values. However, emphasizing “family ” over “business” can harm your business. It results in unnecessary conflicts that affect the progress of your business.
Hence, there’s a need to balance family dynamics and professional demands. Never let conflict within your family affect your professional decisions. Take necessary steps to separate personal relationships from work.
One way of doing so is to make a rule never to discuss work at home. This policy is especially needed during family gatherings such as holiday celebrations. If you master following this policy, you can make your home a much more peaceful place.
4. There’s No Harm In Consulting With Outsiders
As you take steps to improve your family business, there’s a high chance that your decisions will be significantly affected by family relationships. In some cases, parents still view their children, their employees, as a child. Thus, they might not have full confidence in their recommendations.
In other cases, since they know them personally, they might doubt their capacities. Bias is also hard to remove, especially if you’re sharing the business among two or more families. As such, it’s beneficial to seek the help of a family business consulting group.
An outsider’s opinion can help you sort out personal opinions and focus on what your business needs. They go over the facts and present the reality to you, allowing you to make a more objective decision. You can also get fresh ideas from family business consultation groups.
5. Outside Experience And Expertise Are Valuable
A passionate set of employees is at the heart of a successful family business. As such, don’t pressure your relatives to join the family business. Instead, allow them to explore and find their path.
If, after exploration, they find that their passion is in your family business, require them to get outside experience. Don’t make them work for the company immediately and let them obtain experience from similar establishments.
This way, they get to hone their skills and learn new things which they can apply to your business. It also allows them to experience being a “regular” employee. This helps them become a sensible employee when they start working in your business.
There’s no harm in hiring outsiders for leadership positions because of outside expertise. It’s common to want your relative to succeed in the business and post them in managerial positions. However, you mustn’t neglect the business aspect of your operation.
This means that you should only give them leadership roles if they fit the job. If you know that they lack the skills and values, hire outsiders. There’s a large pool of leadership talents that you can tap into.
6. Create A Family Business Succession Plan
Finally, you must develop a family business succession plan. A family business succession plan helps avoid internal conflicts. This is because executive succession planning, commonly referred to as family business succession planning, details what will happen to your business after you retire.
It not only dictates who will take over your position. It also includes cash flow arrangements or a financial plan for the company. You can also outline here the roles you play even after you retire.
Positively People, Your Family Business Genie!
Are you a multi-generational family business experiencing issues in implementing workforce strategies? Perhaps you’re having difficulties developing a family business succession plan? Whatever the case is, Positively People are here to save the day!
From executive coaching, organization-wide culture change, leadership development continuity, and more! Our team of experienced and skilled experts can help you reach your family business goal. Get in touch with us to learn more!
