Family Business: How to get it Right – Part 2

I have grown up with family businesses, and now as an ecommerce consultant I continue to have first-hand experience of family enterprises. In my previous post about family businesses, I shared my insights on the repeat problem areas in these types of businesses. Today I’d like to focus on understanding the strengths and weaknesses of a family business, and on how to establish healthy patterns to build successful family businesses.

Why set up a family business?

If you are figuring out the pros and cons of a family business, it is worth remembering the many good aspects of a family business:

Great Co-workers: The idea of building something with your loved ones, and to have the joy of sharing one’s dreams and achievements with the people who matter the most can be an incredible motivator. Shared values and family loyalty can make for a supportive work environment and in the best scenarios there is great trust and open lines of communication which make for very productive work relationships.

Trust: When you have strong families ties and you trust one another, there is no greater strength and competitive advantage.  You trust your family members to make sound financial decisions, you trust them to work diligently and care about the business you’re building together, and trust that you truly got each others back.

Increased Flexibility: A family business allows people to determine their schedule to a certain extent and allows for a flexible and family-friendly work environment.  While self-employed folks can do this, having the support network of family members engaged in the business allow for the business to run even when one family member is not available. A sick child or taking a parent to the doctor has a whole different attitude in a family business as opposed to average corporate situations. Work-life balance can be more than a mere jargon when you work with your family!

Ability to provide opportunities for family members: Many who start family businesses mention the fact that they find it satisfying to provide opportunities for their relatives, their extended family. It fulfils their entrepreneurial dream to build something that gives them a pay check, and the ability to provide for a larger family network can give a special feeling of achievement. This also ties in with the sense of building a family legacy a there is a tangible feeling of building something for the long-term.

What is the downside?

As they say, for every up there is a down and so it is with family businesses. While there are great benefits, there are also challenges.

Inadequate Skill Set: If the human resource pool of a business is the family, there is the real possibility that not all the required skills and talents are available in the family.  If personnel choices are made purely on the basis on relationships, that can lead to bad appointments which can ruin work and family relationships in the long term.

Unresolved Conflict – Bad family communication patterns can get carried over into the family business – if people tend to avoid open dialog for fear of confrontation, it can lead to an atmosphere of unresolved conflict. This very often means problems swept under the carpet and ill-defined work roles. If siblings have a habit of bickering it may get carried over to work decisions which will make for a bad professional environment.  Old patterns of communication such as only hearing what someone wants to hear,  not really listening because you’re already have a rebuttal, coming on too strong with the rationale that you’re just being direct, or not speaking clearly to avoid hurting someone’s feelings, can completely destroy a family business.

Family Dynamics Seeping into Business:  When members of a family have problems either as individuals on in relation to each other, it can have an immediate effect on the business. I have heard it said that disability, death and divorce can wreck havoc on a family business!

The other way in which we see a negative impact is that interpersonal relations often trumps the organizational chart in family enterprises, with roles assigned based on family power balance rather than skill sets. And sometimes unhealthy patterns of trying to be encouraging through bad performance, a role parents may feel obliged to do, can be disastrous if bad business choices are not challenged or questioned.

Finding the balance

In reality a successful family business is all about managing the cons to enjoy the pros! Treat the business enterprise as a business first and foremost. You may want to have a large print-out of the following ideas to make it an integral part of your management:

• Stress the importance of communication
• Emphasize logical reasoning in business choices, avoid emotional impulses
• Reward good performance, don’t be blinded by family loyalty
• Take pride in being fair, avoid bias
• Nurture relationships outside of the office.
• Don’t pad payroll with family members who are not contributing to the company.
• Avoid the family vs. non-family dichotomy in the workplace.
• Be fanatical about documenting processes. This helps set expectation of job roles and responsibilities.
• Make legal documents non-negotiable – this will help deal with employee contracts, financial documents and even a succession plan.

If you can keep a clear boundary between business and personal life and take the approach that a structured business is good business for everyone, you can avoid much of the messiness of family businesses!  There is a saying: Don’t let your business destroy your family and on the same token, don’t let your family destroy your business. If you take these words to heart, your family and your business should thrive.

Written by Shirley Tan