Family-owned businesses normally experience conflict, and sadly its normal for those businesses and families not to have a formal management structure with standard practices and policies. Instead, families and family businesses tend to go with an informal management style, which can make conflict resolution more difficult and can inhibit a company’s growth.
With family businesses, there are more dynamics and conflicts of interest that exist in non-family businesses because there are more than just business issues, but also family issues and ownership issues. To help set the framework and structure for your family business, here are six rules to consider to help you avoid family fights and business blunders.
Rule No. 1 – Only put family members on the payroll if they work in the company and make a real contribution to the business. Everyone needs a clear role and defined responsibilities, leaving no gray area for interpretation. Each person should have a title, job function, and appropriate compensation for the job. Although they are tough to give to family members, make sure that give performance reviews all employees, including family members. Also, if you are going out to bid or are seeking suppliers, award the work to company’s bases on merit and not relation.
Rule No. 2 – Treat family members and non-family members as equal employees, not giving family member’s special treatment or providing special favors, which can de-motivate non-family employees. For a business to thrive with a happy team of employees, you want all employees, related or not, to feel like a raise or promotion is within their reach, regardless of their relation.
Rule No. 3 – Tread lightly with family relationships, taking special care not to reward or punish a family member in the business because they are related or history with them. If other employees are disciplined for bad behavior, the family member must receive the same discipline, and not receive a pass just because of the relationship and bloodline. Additionally, you need to praise and reward exceptional work of family and non-family members.
Rule No. 4 – Communicate family relationships openly with employees, not hiding the fact that you have friends or relatives working for you. Non-family employees should feel that they have the same information about the business as family members with the same position or level of the company. Consider holding company retreats separate from family retreats.
Rule No. 5 – Make sure family decisions, and business decisions are separate. Avoid letting family members special non-business related privileges like borrowing a company vehicle or using company’s IT person to help them set up a home office. Also, avoid passing off personal expenses like family vacations as business expenses. A good test is to ask yourself if a non-family member were to spend money on an item or service, or use company resources would it be okay. For example, do all employees have access to the IT guy for personal use?
Rule No. 6 – Create and stick to healthy boundaries between business and family. This applies especially to husband and wife teams. Agree and stick to a system that allows for space and creates separation of the two. Some couples don’t drive to work together, or won’t talk about business after 6pm, on the weekends, or on family vacations. Be sure you tend the relationship outside of the business, or it can suffer. In general, try not to work with family members off the clock or outside of the office.
Running a business is hard, however running a family business can be even harder. The long-standing family businesses are successful and continue to thrive because they communicate, treat all employees the same, have healthy boundaries, run all aspects of the business like a business, and set clear boundaries.
