How Family Business Generosity Can Hurt Relatives

Family Business GenerosityWhile there are many reasons to start a family business, generosity often is named. Specifically, the ability to bless your relatives and staff financially. Unfortunately, there can be too much of a good thing, and this is one of them. More than one family business has gone under from giving away too much.

Part of our family business advisory services includes determining where to cut back. Learn more in this blog about some common pitfalls that we see at Positively People.

Don’t Trap Your Family

Offering a generous salary upfront may trap some family members into their job. Even if they become miserable, other companies in the area aren’t paying as much for the same position.

Bad blood felt before working together can also worsen tension between members. When they discover that quitting isn’t an option, they could resent the company more. While having the ability to pay relatives more seems great, they may not want it. Learn how to approach your family more effectively with our advisors.

Leave Emotion Out of Their Salary

Family business consulting reveals many unresolved problems at home that can appear at work. A lot can impact operations, whether it’s a parent’s guilt, a sibling’s resistance, or a lack of experience.

Family business succession becomes a way for some to atone for past mistakes. Others may make relations worse intentionally to weed out unwilling participants. In the end, any emotions between members need to be left at home. Seek practical advice from experienced agents if your firm isn’t growing.

Don’t Let Domestic Roles Overlap with Corporate Roles

Family governance boards may act out in the way of wanting to help, but can often cause unintended consequences. That can look like informality in the boardroom or even resentment.

We see many families that create codependence through acts of generosity. Old emotional wounds can reopen when parents become their children’s boss. Part of continuity planning is determining who can work with which members best. Start working towards a more effective board with a family business advisor.

Run Your Businesses Like a Business

Oftentimes, the first generation is the worst about throwing money at family members to get them to commit to the business. It isn’t until the second generation takes over that those behaviors are usually modified.

Unfortunately, it could be too late with too much cash already spent. Not only do past problems need to be solved, but current ones as well. Many companies realize this way too late that they were overly generous. You’ll want to run your business like a business to set future generations up for success.

Contact Us for Family Business Succession Planning

It takes communication, flexibility, and a willingness to change to see it happen. When family brands are overly generous, it can doom their future. We understand that the entire point of starting your business was blessing your family members. However, your firm isn’t a charity, and there is a limit to what should be given.

No one wants to turn their family away, but there are times when you have to act objective. You need us when you need a partner that helps you grow. Contact Positively People to receive better planning for your company.

Learn more about Positively People Services Family Business advisory.


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