Soriano: Common issues that can tear family business apart (part 2)

“While the journey can be difficult, those that succeed enjoy many benefits. Be deliberate; be courageous. Work the issue with sincerity and expect the best from each other. The rewards are many” Managing Nepotism: Absolutely No Entitlement Family members, whether organic or extended (in-laws, step siblings) should be required to earn their stripes and show they are qualified for a stated task or job.

This can be quite a challenge if family members have joined the business with their last names as their birthright. But if you really want growth in the organization, there is still time to address this concern. For starters, get everyone to comply with the same set of HR rules defined by the HR Department. If the HR department is weak, invest on an experienced and qualified HR practitioner to manage the department.

Nepotism can be safeguarded against with several precautions. These include pre-stated requirements for family members such as education and outside work experience in order to qualify them for a position. These “rules” can be part of a family agreement.

3. Letting emotions run the business

If you let emotions interfere with your business, it can make you appear weak to your employees and customers, and severely affect your ability to make sound business decisions. On the other hand, if you are insensitive, you may appear cold and unapproachable. Lack of sensitivity with family employees can also cause problems at home if you are not careful. You will need to determine the right balance of emotion needed based on the dynamics of your business environment.

4. Losing non-family employees

Every business needs a good mix of people to help it grow. Non-family employees add balance to the organization because they have an ability to view the business from an unemotional position — they can offer valuable input on how to make the company better. Without opportunity to advance or take on a leadership role, many talented and ambitious employees will move on.

5. No succession plan

There is going to come a time when someone retires, leaves, or perhaps passes away. If you do not have a plan, you are setting your business up for failure.

A succession plan is absolutely necessary to ensure the business lives on from generation to generation.

Formulating governance policies means a family that works together.

One of the key factors for ensuring a successful family business is the understanding by everyone involved that, at work, the success of the business must be paramount.

Verbal communications must become more impersonal and attitudes more objective. Family members who work in the business must accept the employer/employee relationship— just as they would in another business. All job descriptions must be clear, in writing and adhered to. Any personal problems that originate at home should be left there when the workday begins and workplace issues should not be allowed to “invade” family life.

When all family members accept and abide by this distinction between “home” and “work,” not only will it help avoid strained personal relationships, but it will also communicate to other employees that, at work, the needs of the business come first.

There are three components necessary for building or re-building a strong and effective foundation for a successful family business:

  1. Clear and effective communication between all family members;
  2. A well defined reporting structure—a chain of command;
  3. A documented strategic plan for business growth and orderly succession.

Collectively, researchers and authors suggest the following tips to manage threats to your family business:

  • Make the family members realize how the business will be run…” Is it business first or family first”?
  • Clearly define the goals of the company and make sure everyone is on the same page.
  • Outline each family employee’s role and responsibilities and hold them accountable.
  • Keep an open line of communication at all times.
  • Address all concerns quickly and in a non-emotional manner.
  • Create a fair promotion and salary system that is based on individual merit and ability.
  • Take a management course to learn how to separate your emotions from the management process.
  • Provide opportunities for advancement in your business for non-family employees.
  • Be prepared and create a succession plan to ensure your business lives on after you
    are gone.
  • Test pre-agreed business protocols and process flow.
  • Seek outside advice so decisions related to family matters are unbiased and objective.
  • Family members must collectively agree to craft a family charter or constitution.
  • Establish a legally-binding shareholders agreement.
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