5 Tips for Managing a Successful Family Business

If small business is the backbone of the U.S. economy, then family-owned businesses for the most part make up a large portion of the vertebrae! In fact, family-owned businesses account for 90% of all businesses in the U.S. (large and small) and continue to be a powerful force.

However, the day-to-day job of a family business owner can easily be compromised and complicated by relatives who need to be reconciled to working together.

These challenges are very real – emotions can interfere with sound business decisions; unskilled family-members can soon turn into “hangers-on”, and growth can be compromised by relatives who might be reluctant to further invest in your business or take-over when you move on.

If you run a family business, read on for some tips for managing the particularly unique challenges you face.

    1.    In Business, Business Comes First

First things first, this is business and the success of that business is paramount, regardless of your family politics or ties.

In the workplace, decisions must be objective, not personal; the boss/employee relationship must be accepted by all family members; every job description must be clear and understood; and work life and home life problems should not overlap.

To help you put controls around your business and avoid confusion about roles, be sure to:

Develop and communicate a clear business plan and mission – so that everyone on the team is singing off the same hymn sheet.

Establish a clear chain of command and lines of authority for decision making. If a family member does not have a role to play in the decision making hierarchy, make sure they are aware of this and give them structure in their role in the business.

Communicate clearly and often with family and non-family members. Not only does this help avoid confusion, it also gives you a holistic view across your business and nips any emotion or potential “blame-games” in the bud.

Being able to adhere to these principles sends a very powerful message to all those involved in your business. However, this is often the ideal, and not the norm!

    2.    Consider Hiring a Non-Family Member to Oversee Operations

If you manage a family-business not only do you need to be a strong manager you need to be thick-skinned and tough enough to make decisions and stick to them.

If other family members report to you, be clear about their lines of authority or consider hiring a non-family member to assume a position of authority so that you are free to work on strategy, future plans and growth, while that person guides day-to-day operations.

    3.    Dealing with Family Discord

Whether it’s a difference of opinion or a performance issue, dealing with discord or conflict among family members in a business environment is tough.

Families will always bicker, but the challenge is not to let the bickering from interfering with the business and rub-off on non-family employees who might be tempted to use the same emotional appeal to gain position or get their own way – because they’ve seen your family succeed at it.

Especially challenging is trying to remain objective about the situation. Try not to take sides with any particular family member, and make it known that you won’t let disagreements affect your business. This not only stops disruptive family members from using emotions to politick for status – it also sends a clear message to other employees.

If you find yourself stuck with a difficult family employee with whom you can’t reconcile yourself, consider moving them into a new line of work or encourage them to transfer to another branch.

     4.    Dealing with the Family “Hanger-On”

You know the one – the relative who needs a job badly, but really doesn’t exhibit any true aptitude or useable talent! If you really must hire that person, accept the fact that you will need to cultivate them into a role to avoid them causing problems down the line. Try to provide special training under the mentorship of a non-family member or consider letting that person spend two weeks embedded in different areas of the business so that you can identify skills and interests and see opportunities for where you might permanently place them.

    5.    Preparing the Next Generation

Many family businesses remain so for years if not decades, but how do you ensure that the next generation continues to grow your business and serve your loyal customers when you come to retire or move-on?

The best time to plan for succession is well in advance! As invested family members, consider these questions:

What are your family goals for the future?

What are the plans of the next generation? Who is interested in staying in business and leading the way? Is there more than one aspiring leader-in-the-works? Who is best equipped to lead? What role will the other members play?

And, of course, what if no one is interested in succeeding your business?

Then develop a plan to groom and mentor the future leader(s) of your business. Set a goal for the transition to begin, take it slowly so that you can still have a part-time hand in your business and provide on-the-job mentoring, without being too much of a micro-manager.

You’ll also need to plan the financial and legal steps of transferring business ownership. SBA offers guidance on the steps you’ll need to following in this guide to Exiting a Business.

Additional Resources

For more insight into the challenges of managing a family business, as well as further tips on family-financed businesses and dividing profits, read this management and planning guide from the Small Business Administration on Challenges in Managing a Family Business (PDF).