When it comes to small to medium business, one almost automatically conjures up the image of a Family Business. The term is reminiscent of a sitcom and sometimes can be just like one!
Working with close family members or even more distant relatives presents many challenges. These relationships have unique complexities that are often beyond the ability of those involved to deal with. Over time some of these relationships collapse, some thrive and the businesses fortunes usually follow suite.
Approximately one third of companies in the S&P 500 index are family controlled. News Corporation, The Ford Motor Company, Wall-Mart and Mars are some of the better known family businesses on this list. But these are sophisticated businesses that have overcome some of the issues that many small businesses have to contend with.
Most smaller family businesses don’t follow a formalised management structure and so there are going to be issues.
These are the issues that may result:
- No clear, shared Vision for the business. Without this, there can be no documented strategic plan and therefore long term sustainable growth will be difficult. If the business is in a competitive market, then it could become very challenging as better organised businesses gradually erode their market share.
- Lack of properly trained and qualified future leaders. Top positions are held for family members who may be given opportunities beyond their abilities. The original founder or retiring owner may find that their anticipated long term future income from the business may be far less than they bargained for.
- Family issues affecting communication. Close family members working together sometimes take their work issues home and bring their private family issues with them to work. Typically, spousal relationships create the biggest problem. Non-emotional business communication becomes a challenge and the business suffers. Tension in the workplace can spill over and affect other staff members.
- Family jealousy. Sometimes the eldest son say, may be chosen to run the business whilst an equally capable sibling may be passed over. Family politics ensue creating tension and strife within the family.
- Lack of interest in the business by successor generations. Younger family members are often predestined to go into the family business, irregardless of their preferences or proclivities. As they are given greater and greater responsibility, their lack of interest and enthusiasm can jeopardise the business and the livelihoods of the non-family employees.
- Lack of formal business structures and documentation. Without these, efficient operations may be difficult and growth and competitiveness is hampered. If retired family members are relying on the business to fund their retirement, they may have no choice but to remain involved to keep things running smoothly and thereby safeguard their income.
- Lack of formal planning and budgeting.
- Preference given to family members for senior management and leadership positions when they are not the best candidates. Even when not intentional, old fashioned nepotism undermines the system of merit we all expect. Family member can end up in senior positions, displacing better qualified, non-family members. Also, other staff members can become disillusioned or frustrated with the lack of promotion opportunitues and leave.
- No formal succession planning. Unfortunately business acumen and natural ability of the older generations is not always passed on genetically (or otherwise). Without formal succession planning, proper contingencies may not be taken and the businesses future could be jeopardised.
- Tunnel Vision. Without outside input, family business can isolate themselves from valuable fresh thinking and innovation.
There are surely a great many issues in addition to those above.
In family businesses where there is ongoing tension between family members, often far too much energy gets invested in the internal issues. This distracts people from their mission and the business can whither. Another phenomenon that occurs, particularly when husbands and wives who are working together and are quarrelling, is sabotage. In these situations one or the other will deliberately do something that will harm the business, to cause the other spouse upset, stress or anxiety – irrespective of the financial or business implications.
What should one do if you are in a family business where some of the above is occurring?
If you are a family member: A good option is to involve an interested but non-family professional who is a forthright, straight-talker and someone with a robust constitution. This person can act as the voice of reason and help the family to do the right things that will keep the business moving forward.
If you are not a family member you have a difficult situation. If you have the family’s confidence and you can be candid with them, then suggest the option above. If not, you will have to bide your time and deal with whatever happens.
If you are involved with a family business, what interesting scenarios have you come up against?