Done right, a family business can be a dream. You work with those you love most, create something that can support your loved ones, and have a built-in succession plan which can work for generations. But family businesses can also intensify conflict in both work and family relationships. Is your family able to work together that closely? Can you still run your business like a business when your family members are involved?
Running a family business takes some careful work. Consider these tips to make yours a success.
Don’t Cross the Streams
Working with your family shouldn’t erase the difference between work and home life. At home, your priority can be the relationships between family members. At work, though, you need to focus on running a successful, professional business.
Hire for Success
Whenever you hire a family member, make sure that family member is right for the job. Of course you want to support your family, but offering a “pity job” to a family member who isn’t qualified will hurt your business. Ideally, younger family members should work outside the company at first to gain experience. Promotions, as well, should consider ability more than family relationship. Sometimes an outside hire is the best person for a management job.
Likewise, when it’s time to let a family member go, don’t let sentiment stop you from making the right choice. When non-family employees tell you a family member keeps their team from succeeding, listen. This is business time, not family time, and your urge to defend the family won’t help your business flourish.
Remember that each family member has their own goals and career path. Maybe their plans align with your dreams for your business, maybe not. Never pressure family members to work for the family business—they’re still family, whether they work with you or not.
Underpaying family members is another mistake. Just because they are family doesn’t mean their labor is worth less. If they feel respected and fairly compensated, they’ll be more likely to keep investing their time in the family business.
One extra sensitive moment is when a family member chooses to leave the company. It may feel like they are quitting the family. Make sure to communicate that family is forever and the business is optional. If their career path takes them away from the company, support them. You don’t want employees who are only there to avoid upsetting you.
Keep It Professional
It can be tempting to keep things casual, especially when a family business is small. Why put things in writing when you could just talk about them over dinner? But as your company grows, having documentation helps keep things clear and fair. With policies worked out on paper ahead of time, you’ll avoid conflicts over differing expectations.
Here are a few things you should always put in writing, with the cooperation of all stakeholders:
- Each person’s role and stake in the company
- Who reports to whom
- Pay scales for each position
- Exit plans for family members who leave the company
- The succession plan
Having all of these things in writing can prevent conflicts between family members, as well as accusations of favoritism from non-family members.
Get the Outside View
Often, family members themselves can have trouble seeing the big picture. Certain dynamics are invisible, because they’re “the way things have always been.” Getting outside help can be essential.
Non-family employees are one vital resource, especially if they have prior experience they bring to your company. Having outsiders present can break up the dynamics you’re used to, and point out to you any dynamics they find problematic.
In some cases, a family counselor or mediator can help work through issues that arise in the business. If a family member feels passed over or treated unfairly, getting family members together to talk with a professional can help everyone feel heard.
Lastly, a financial advisor who works with family businesses is a must. They can help you decide the right business structure, measure the success of your business, and advise on all your business decisions.
Ready to Optimize Your Family Business?
Is it time to hire a few family members to share your business success? Or have you been running a family business for years and want to make sure you’re managing it wisely? Either way, a financial advisor can help. Contact us to get started.