Avoiding family wars

CONFLICTS are part of a normal experience for many small startups and family-owned businesses. However, conflicts (especially the kind where every day seems like a battlefield), can actually inhibit the growth and profitability of the business—a kind of glass ceiling that keeps the family business from reaching its true potential. It causes not only disruption in the business, but hard feelings within the family. The best way to deal with potential conflict is to anticipate and avoid it rather than having to work on resolving problems after they arise.

What to do with conflict?

According to Don Schwerzler, a family business expert in Lawrenceville, Georgia, conflicts in family businesses are more difficult to resolve because there are three levels of interests at play—family issues, business issues, and ownership issues. “A dispute that occurs in one area can quickly cascade into the other areas.” And since the family is an emotional system as well, old hurts and loyalty challenges can last a long time.

On the other hand, a family business has strong points, like children learning about their company at the breakfast table and by the time they are old enough, they already know the business by heart. However, every family business is unique and complex in its own way, so boiler plate solutions don’t always work.

Here are important rules to follow to help you stave off some family business blunders.

Rule No. 1

Hiring family to work at your small business has its pros and cons. Cheap labor, unconditional loyalty and built-in familiarity are a few. Don’t put family members on the payroll if they’re not working in the company or can’t make a real contribution to the business. In a startup or family business, everybody does everything. This is where a lot of conflicts occur. Make sure that everyone has a role and responsibilities that are spelled out and are very clear, says Jane Hilburt-Davis, president of Cambridge-based Key Resources and co-author of Consulting to Family Businesses.

Establish each person’s title, job function, and compensation. And make sure that you have performance reviews for family and non-family employees alike. Don’t award a contract to a supplier who is a relative.

If you don’t have an employee handbook, this is the perfect time to get one. If not, you are asking for trouble. And there ain’t no trouble like family trouble. Policies for things like overtime, paid holidays and disciplinary guidelines must be comprehensive and you should have them in writing. Some family members might entertain feelings of entitlement – which translates into unreasonable expectations in terms of advancement, rewards and compensation.

The content of family employment policies differs from one family business to another. In developing its family employment policy, the family should focus on the rules, conditions, and processes that allow it to attract and motivate the best competence available. Once developed and agreed upon by the family, the written employment policy should be made available to all family members. This will help set the right expectations about family employment among all family members.

Rule No. 2

Special favors given to family members and friends demotivate employees and set a bad example. Don’t create two classes of employees—family vs. non-family. Be careful not to show family members special treatment, without any justifiable reason/s. Sometimes, great employees resign because they feel they can’t go up in the corporate ladder thinking that family business is open only to bloodline members.

Perhaps, your relative is a very good performer. If you reward him or her, perceived nepotism may arise. There will be people, without question, who believe the sole reason for your cousin’s success is because he or she is your family member–unfortunately, they’ll just never get past it.

Nearly anything could be construed as favoritism. Can you handle it? Is he worth it? Like any other decision in business, you need to give the prospect of bringing aboard a family member a lot of thought, and it’s imperative that you have a “back door” strategy just in case things don’t work out.

Rule No. 3

Be careful not to abuse family relationships. Meaning, don’t either reward or punish someone because they are a relative with whom you have personal history, says business and tax consultant Augustus McMillan. “If others are disciplined for bad behavior, your family member must be disciplined also.”

Of course, emotions are always involved. Think about it: How is your cousin going to feel when you, as his boss, scolds him for some mistakes committed. He’s going to take it personally because you have a personal relationship. Harboring ill feelings is not good for business.

At the same time, you need to reward and praise exceptional work. “Treat any employee, including family members or friends, special if they deserve it,” says McMillan.

To be continued.

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