If building a successful business wasn’t hard enough, doing it with family members can take the stress and challenges to another level.
Family businesses still need written mission and vision statements, effective people management, and a systematized financial process.
In fact, many family-owned companies seek out business coaching from us because of the major obstacle they face in building a successful business: working together. Family firms can create healthy workplace relationships from the CEO down to the children that might be working part-time in the family business. It all comes down to healthy boundaries, structure, trust, and business systems.
We help you build your family goals by helping families understand how to manage conflict effectively within the company. This helps considerably when it’s time to talk about a succession plan.
We also teach families about creating an environment that is conducive to growth and decision-making while keeping those family relationships intact.
Our goal with this article is not only to provide you with tools to run your small business better but also to give you peace of mind knowing that you are making sound decisions when dealing with family members in difficult situations.
ADVANTAGES OF BUSINESS WITH FAMILY
The advantages of family firms can be amazing.
Think about it.
You love your job, you enjoy more flexibility, and you’re able to build a legacy of financial security for family generations to come. Benefits like this help a business look better too, and it has a reputation of trust when customers think about the business relationship.
Statistics consistently show that family businesses have a higher growth success rate than similar-sized businesses where family is not involved.
When family business owners get this right, life and business are amazing. It’s the best of both worlds; a thriving business and a healthy family. Really, what else is there?
When family businesses don’t work, things can fall apart quickly. Business with family is tough, and the key is understanding what makes people tick so you know where to draw the line between personal needs and professional obligations.
This means having clear expectations on both sides of the equation and keeping things in balance. You must have a plan for managing conflicts before they arise, say between your management team and family members. And if there’s no resolution or agreement, then you’ll need to decide who is more valuable to the company. The first step, and hopefully the last step, is resolving any issue before it impacts business relationships or cash flow.
For example, family members overstepping their authority just because they’re related to the CEO leads to confusion, hurt feelings, unrealistic expectations, friction, lack of accountability, and inconsistent authority dynamics.
If that sounds heavy, it should. Family-owned businesses need special care and attention.
Let’s take this article deeper and get into six healthy habits you and your team (family and non-family alike) can implement inside your company immediately. These topics can seem relatively obvious at first, but we find that because they’re so obvious they don’t get the scrutiny and attention that they deserve.
Here we go:
6 HABITS OF A HIGHLY EFFECTIVE FAMILY BUSINESSES
SET HEALTHY BOUNDARIES
Setting healthy boundaries when building a family-owned business is critical. Healthy boundaries will allow you to maintain strong relationships without sacrificing your goals. We’re talking about boundaries past just children and parents for example. All relatives and non-family members should be included in this discussion. They’re essential to running a profitable business.
You might be co-workers during business hours, but at some point in the day, that needs to fall away and time for going back to family needs to be the priority.
Specifically when dealing with family members, however, you have to set some strict guidelines that will allow everyone to separate family life from business life, so this may be a serious challenge for you. Family businesses struggle with this one because the company culture can be one where it’s casual and relaxed and sometimes this goes against setting healthy boundaries.
It will be easier to practice good work boundaries and move between work and personal space if you have a clear idea of what the rules are.
ESTABLISH CLEAR COMMUNICATION CHANNELS
Communication is vital to maintaining healthy relationships and it starts with the CEO at the top. If you want to keep your employees happy, communicate frequently and honestly. This helps them feel valued and appreciated.
Keep in mind that everyone likes to be communicated with in different ways. One employee, family member or not, might appreciate more candor than another one, and some may prefer speaking in private where honesty can more easily be tackled without others listening in.
One piece of your communication system, especially with family-owned businesses that will help to alleviate a lot of unnecessary rumors and talk is complete transparency. Transparency, from the board of directors (if you have one) all the way down your org chart to the employees at the lower pay scales.
Transparency creates trust among family members and non-related co-workers alike. It also goes a long way in building loyalty when your employees feel like your company is an open book.
When everyone knows everything going on around him/her, he/she feels more comfortable sharing ideas, opinions, and concerns.
Sometimes mixing family and money is a recipe for a bad dream. So transparency might be even more important in a family business.
Be sure, as a family, to speak candidly about any other ground rules that you think are necessary so everyone can agree on them and get back to their job of growing the business.
MANAGE CONFLICT EFFECTIVELY, AND IMMEDIATELY
Managing conflict effectively requires setting up structures and processes that support healthy communication and collaboration among employees. This includes defining roles and responsibilities for each family member, clarifying decision rights and duties, and developing ways to resolve disputes.
If you’ve got a family member who isn’t pulling his or her weight, take action immediately. Letting poor performance from a family member continue to happen will end up sending a lot of bad signals to non-family employees.
It’s also important to set expectations early on about what is expected in the workplace. If your employee doesn’t meet those expectations, it can be difficult to change their behavior later. The following are some tips for managing conflicts with co-workers in your firm:
* Have an open line of communication between all members of the team. Make sure everyone knows how they should approach problems and issues so there aren’t any surprises when things go wrong.
* Be clear about what behaviors are unacceptable at work. Don’t expect people to read minds; make it explicit by saying something like “I don’t appreciate being interrupted while I’m working.”
* Set boundaries around time spent away from work. For example, if someone needs to leave early every day because he has a child care issue, let him know ahead of time so he won’t feel pressured to come into work late just to get more hours.
A lot of these issues can be addressed in what we call a Position Agreement, and we cover the details of that management tool in another article.
RESPECT YOUR ORG CHART AND LIVE BY IT
Every team member on your organization chart (chief executives included) should know what role they have in the business, and this gives them a clear direction to go in. It is also an indication of the precise results everyone will need to achieve in order for you to be successful.
Sometimes this is more difficult than it has to be. For example, entrepreneurs need to be committed to mapping out the org chart and combining it with Position Agreements for every spot in the firm.
Once the org chart is mapped out and communicated throughout the family business, respect it and live by it. Failure to do so can result in managers/family members crossing organizational lines and I cover more on this later in this article.
Sometimes you have to make rules for how you work with your family members at both the office and outside of it. Be transparent with one another, and tell them how difficult it is for them to not be involved in each other’s positions or departments.
Guidelines can be created for when and how you’ll check in on important decisions, such as how to give each other feedback.
It’s not uncommon to be alone on an island when you can’t be open with each other. That’s something that is not good for growing your business or working together.
Success here is a mapped-out org chart that everyone respects and lives by regardless of ownership relations.
THE MOST QUALIFIED PERSON SHOULD GET THE JOB, NOT THE MOST RELATED
There can be a fear of nepotism under the surface in any family business. The best way to avoid this is by hiring your family member because they are qualified for the position and fairly beat out all of the other candidates.
Hire them based on their skill and experience not just because you’re your child, niece, or nephew. Everyone in the company, employees, yourself, and everyone else should treat this hire like you would any other hire.
If the new hire is related to ownership, and they aren’t the best candidate for the job, it will lead to resentment and frustration among the employees that aren’t family.
Hiring and promoting family with inadequate background skills is a sure-fire way to ruin employee engagement and employee satisfaction.
DON’T CROSS ORGANIZATIONAL LINES
A line-crossing is when someone other than a direct boss assigns work, disciplines, or manages an employee. This is, at best, confusing to employees who are being told what to do with deadlines by more than one manager. At worst, the employee becomes so frustrated that they leave your company so that they can go to work for a business with better structure and professionalism.
When a manager crosses organizational lines to assign work or manage an employee, it undermines the general manager and can mean that other important work won’t get done. There is only one manager that must be accountable for each position.
What does this have to do with build a family business?
We see managers crossing organizational lines more often in a business with family members. Family members in a family-owned business tend to be more casual and less formal then other companies. For this reason, I tend to see more often than I would recommend family member managers crossing org chart lines and working with another family member in another department only because they are related.
Remember, it’s important to create an organizational chart and follow it without crossing lines if you want to build a mature business, family or not.
BUSINESS WITH FAMILY CAN BE AMAZING, BUT IT TAKES DISCIPLINE
In conclusion, there are many ways to run a family business successfully. However, these five tips above are some of the easiest ones to implement. They help keep things running smoothly while still allowing you to grow your business into something great!