Three problems that could affect every family business

Starting a business is a game of risk – there are many things that could go wrong. But with a family business, whether you’ve launched or inherited it, there are even more potential problems. Here’s how to deal with a few of them.

Hiring family

This is one of the toughest things to get right in family businesses. Sometimes children feel obligated to go into the family business and you end up with staff that are unmotivated and uninterested in working towards your goals. However, it can also be seen as a fall back option if parents make the promise of “there’s always a place for you here”. Family businesses that fall into this trap are now populated by second or third generation family members who failed in other businesses, or spent their younger years as aspiring athletes, artists or musicians.

“If, after careful consideration, you do decide to bring on little Mort or Cousin Molly, the last thing you should do is relax any hiring procedures and practices,” Chris Prickett, a successful entrepreneur in Phoenix, writes on BusinessNewsDaily. “ On the contrary, you should stick to the book and maybe even add a few pages.”

The last thing you should do is relax any hiring procedures.

He recommends creating an employee handbook, if you don’t already have one – and making sure that policies on things like overtime, holidays and disciplinary guidelines are comprehensive.

Prickett also says that that it’s important to be wary of nepotism. “Bringing in your kid brother to sweep the floors on weekends might not cause a ripple, but how about calling on him in to manage a department? He had better be twice as good (and thrice as humble) as the last guy, or dissention and even outright mutiny could follow,” he says.

Following in their footsteps

George Stalk Jr and Henry Foley highlight in a Harvard Business Review article how many family businesses see fathers and their children specialising in the same aspect of business. This, they say, can be problematic for several reasons. “First, by staying in specialised silos, next-generation managers fail to gain the cross-functional expertise needed for executive leadership. Second, when close family members supervise one another, the personal dynamic can prevent candid feedback and interfere with coaching. Together these factors can create a leadership vacuum in the up-and-coming generation. This may prompt the current generation to stay in the top positions too long, limiting the company’s adaptability to change.”

While it can be hard to separate family members from supervising one another in a family business, Stalk and Foley suggest it is important to minimise the time that employees spend working for immediate relatives. “Some companies assign an experienced non­family mentor to each younger family member, to provide the objective performance evaluation and critical advice an employee in a nonfamily business typically gets. For this to work, the coach must operate under a protective umbrella, immune from retribution by the family.”

Separation of family and business relationships

There needs to be a clear definition between family and business relationships for a family-owned company. “When you are in work, you are not family, you are a team working towards shared business goals,” relationships coach Sam Owen says. “When you are not at work, you are not business partners, associates or boss and employee, you are family and you are a team working towards shared family goals. Get the lines crossed and you can fail to achieve your business goals and your personal relationship goals.”

Owen recommends having time boundaries to help define when you can and can’t discuss work. “Dragging work issues into your marital relationship at home at 11pm is not sexy or fun or fair on the other person,” she says. “We all need to have a cut off from work in order to be able to relax and be most productive when we are at work.  Interrupting your own or your family member’s personal time just aggravates the personal relationship and their mental health.”

She also highlights the importance of not bringing tensions and disagreements from home into the office – and vice versa. “Do what you have to do to ‘get into character’, just as and actor would do,” she says. “If you think you can or you think you can’t, you’re right.”

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