A family-run business can be a bit of a daunting undertaking. There are a lot of complex dynamics to balance when working with family, but family businesses have some impressive examples of success. Companies such as Walmart, Ford, Volkswagen, Comcast Corporation, and IKEA Group are all family business success stories. While that may be the pinnacle, family businesses of all sizes come with a lot of potential upsides, along with some potential setbacks.
Any business owned by two or more family members that hold majority ownership or control is considered a family business. This can range from the aforementioned upper echelon of Fortune 500 mega-corporations to small husband and wife mom and pop businesses. Small family-run businesses are a driving force for the economy and are responsible for the majority of all new jobs and are a leading source of employment overall.
These businesses can thrive and grow and the fundamental shared commitment can be a driving factor in growth and performance. That being said, family businesses can require a lot of balance and care. Organizing anything among family members can be a challenge and tensions can run high. A lot of family businesses begin as marital partnership businesses. This trust and sharing of goals and direction can be an excellent foundation for forming a business, but this can be a real challenge to maintain when transitioning to a successive generation.
Transfers of power to the second generation of family business ownership can bring several difficult hurdles. With only about 30% of family businesses successfully transitioning ownership to the second generation, planning can be a very key step. It is very common for family business owners to not adequately plan for naming a successor. That decision can be difficult, but far too often is this not yet decided within the final years before expected retirement.
Overall, communication is always going to be incredibly important, but at times it will also be necessary to try to separate business from family and hold an objective perspective as much as possible. Holding multiple perspectives simultaneously is very critical to success for a family business. Let’s take a look at some of the benefits of family ownership, some of the pitfalls, and what the road to success looks like for family businesses.
Planning With Contingencies
Planning and forethought can mean everything. Especially when dealing with succession and transition. Layout everything important and make sure there is an understanding of the directions the business can take in all possible situations. What are the company goals and who can best guide these goals while adapting to a new era of ownership?
Contingencies need to be in place and there need to be options for every possible outcome. A strategic plan can help clearly define a business’s purpose, and having flexibility will allow for adaptation in the face of new trends and changing circumstances. Anticipation can be very important, so planning for all splitting paths can be integral to success.
Be sure to have insurances and coverages in place for property, employees, and products. A restaurant insurance quote can be an integral part of the planning process. Things can change quickly and building and maintaining security in the face of unforeseen circumstances is very necessary. Insurance policies and coverages can have elements that need an understanding of succession and liability and all of these angles need to be planned out.
Fill Roles Objectively
Family businesses can help support a bloodline. There is the opportunity to offer employment and even leadership to other relatives. This is such a rewarding element of family-owned businesses, but just hiring relatives on namesake alone can lead to a lot of problems in the long run.
All roles require adequate qualifications and performance capacity. Inadequacy is a deal-breaker regardless of whether that employee is a family member. Separating business roles and family roles will be crucial in making the hard decisions necessary for business success.
One good way to view things can be to look for the skills and strengths that may align best for family positions. This can also evolve. However, given the opportunity, some family members will rise to the occasion while others might not.
Adapt With Culture, Technology, And Generational Expectations
There is a tightrope to walk when the time comes for ownership transition. This is stretched between wanting to maintain the operational traditions that have brought success, and adapting to new technology and cultural evolutions that may be demanding change or adjustment going forward with the next generation.
Family businesses are very often heavily customer-focused, and while customers value structure and familiarity, people also change with the times. Their needs, desires, and expectations change and evolve as well. Major changes driven by generational gaps can be hard challenges for trust and it is vital to create an open dialogue and environment of education and communication to bridge the understanding of generational changes.
There needs to be a solid respect and understanding among all relatives working together that separates family roles and business roles. Boundaries are everything. Business roles and hierarchies have to be respected and even if those roles are reversed outside of the office, they must be respected and very clearly defined within the operation of a business.
Receiving critical feedback from family members can be something that takes time to feel comfortable with, but this will be a necessary element of any business. Standards and expectations need to be clearly defined for professional interaction and performance.
Balancing Pride, Ego, Emotions, And Respect
Business decisions can demand a level of even objectiveness that can be strongly challenged by personal family relationships. Pride, ego, respect, and emotional connections need to be held in check in all leadership positions, but when there is power held over family members it can be a lot harder to manage.
It can be good to have a consulting voice to remain more objective in understanding and addressing decisions that may have emotional impacts and influences. Balancing family support with sound objective decision-making is the best guardrail on the road to family business success.