Managing the Most Challenging Aspects of a Family Business

Family businesses can enjoy big competitive advantages over other businesses because of the unity, commitment and long-term vision of its leadership. However, the familial nature of such enterprises, while being the source of such an enduring advantage, can often become the very reason for its undoing. 

Dysfunctional family dynamics can sometimes overshadow business discussions leading to unhealthy management practices like issue avoidance, emotional decision-making or a lack of transparent communication.

Discussing how to manage your business is a key part of your business plan. For instance, if developing a brewery business plan for a multi-generational business, it would be critical to address how the HR strategy will affect both family and non-family employees.

Below we discuss some of the most difficult parts of running a family business and how they can be managed.

Talent Development

It is of utmost importance for a family business to nurture the coming generation for future leadership roles. You need to put in place a holistic talent development plan. One that will instill in the next generation a sense of pride in their family legacy along with equipping them with the skills required to run the business. Because of the lofty aims of the talent development plan, preparations need to start early on. Involve the next gen into the family business discussions while they are still in college. Communicate with them regularly about the business, so they understand what goes into creating and managing a business. This will help them paint a realistic picture of what working in the family business entails.

Equally important is to set up procedures on how the coming generation can join the business. Highlight the importance of skills and abilities to eliminate any favoritism. Fix such guidelines in advance and communicate the same clearly to the next gen. They will be able to imbibe these norms as they mature leaving no room for ambiguity or unpleasant surprises. Moreover, talent development policies that prioritize capabilities over family biases will ensure roles are filled by talented, interested individuals and not someone who is doing this only out of pure familial obligation.

Finally, be sure to address how you’ll boost productivity for remote workers as work-at-home employee options proliferate.

Performance Management

To effectively manage employee (both family and non-family) performance, family businesses must first and foremost communicate job expectations clearly. Right from creating detailed job descriptions to conducting frequent performance reviews. Doing so will give employees much-needed clarity regarding their goals, making the performance review process fairer and more beneficial to both the employee and the organization.

One performance problem that is unique to family businesses is dealing with under/non-performing family executives. This is a delicate issue that nevertheless needs to be effectively resolved to preserve a business’ good health. One way to approach this problem is to designate non-family leaders to oversee family executives. Clear policies need to be in place to support and incentivize such non-family employees to evaluate family members without any discomfort or apprehension.

Training opportunities or performance improvement plans should be offered to struggling employees. If all else fails then a dignified exit strategy needs to be planned for the said employee. Insistence on keeping a non-performing family member in the business can upset other employees (especially non family members). Seeing such blatant display of family bias can cause top talent attrition. It will also negatively impact the wider culture of the organization.

Organizational Culture

Sometimes certain complicated interpersonal dynamics can cause family businesses to shrink from addressing important issues like those mentioned above. Such avoidance tactics might momentarily save a few family members some discomfort but it will jeopardize the business permanently. Family businesses need to establish robust processes to help them discuss these messy but pertinent issues.

Create an organizational culture where no issue is taboo. Encourage everyone, family and non-family, to ask questions and discuss any issue they feel impacts the business and needs to be deliberated upon. Apart from that a lot of family businesses over the years become rigid in their ways. They prioritize traditions over change which sometimes causes irreversible damage to the business. Strive to develop a culture that embraces change and transparent communication to create a business that grows stronger with every generation.