Did you know roughly 60% of all U.S. workforce works for a family-owned business?
According to research from the Family Business Center and Harvard Business Review, the impact family-run businesses have on the U.S. economy is staggering:
- More than half (60%) of the U.S. workforce works for a family-owned business
- Family-run businesses create 78% of all new jobs and contribute 57% to the U.S. GDP
- About one in five firms are family-owned
While family-owned businesses fuel local and global economies, they also have a tendency to fuel complicated emotions.
To get a sense of just how complicated these emotions can be, we conducted an informal poll with a group of small business owners on Facebook to learn about their family business drama and received some interesting feedback. (Answers have been anonymized to protect the identities of the respondents.)
Family drama and small businesses
Some small business owners deal with power struggles between family members while others contend with how to stay on the same page and treat everyone in the family business fairly.
There’s also the matter of employees not effectively doing their jobs. One small business owner said: “The biggest drama would be that positions and roles can sometimes be neglected and anyone thinks they’re the new boss.”
Many who run a family business have a difficult time differentiating between business and family matters. According to one small business owner, “We try to make a rule that there’s no business talk at home. If we do, there’s a set day and time to do so. It’s hard.”
Another respondent commented, “The biggest struggle I have seen with family business is the inability to shift roles. In the workplace, your position is much different than in the home, and in many cases, this needs to be made clear.”
When you run a family business, it’s also hard to clock out for the day. One small business owner noted, “I have a hard time leaving work for the day. I’m still figuring out a good balance.”
Do you share some of these sentiments? Check out these tips for running your family business with the drama.
Communicate clearly and openly
Good communication is critical to the success of any small business.
Don’t assume that just because they’re family, everyone understands your expectations.
Aim to frequently communicate with your team within and outside the family business to help reduce miscommunication, build trust, establish the values of your small business, and ensure everyone understands future goals.
Weekly meetings are a great opportunity to review progress, answer any questions and solve any issues.
Here are a few pointers for running an effective meeting:
- Create a formal agenda and allow individuals to add items in advance
- Determine who attends the meeting and be consistent each time
- Share recent successes and challenges in the business
- Don’t use technical jargon or acronyms that others might not comprehend.
While you might be relaxed around your loved ones at home, it’s important to keep things professional in the workplace.
Ensure each contract or agreement is formalized in a documented form, and never rely on verbal agreements for job descriptions, operating procedures, compensation, or other critical components of your small business.
When conflicts arise in the family business, you can keep them from escalating by putting everything in writing. You can refer to these written documents, from business agreements to project guidelines, to help reduce misunderstandings.
Don’t play favorites
When you’re working with family, you may be tempted to treat them differently than others, from praise and pay to work schedules and criticism. Playing favorites is a common management problem, with 84% of managers admitting that favoritism takes place at their organizations.
Whether you tend to set the bar higher or offer special perks to family members in your small family business, it’s critical that you eliminate favoritism in order to run a thriving company.
Create a succession plan
More than half (58%) of small business owners lack a succession plan, according to a study by Wilmington Trust. Most of those with no plan (78%) say they’re enjoying managing their company too much to consider a transition. Nearly half (42%) say they’re too busy to plan and 44% say that succession is too far out to plan for it now.
In family businesses, succession planning is often complicated due to the emotions and relationships involved. This might be why less than one-third of family businesses survive the transition from founder to second generation, according to the Conway Center for Family Business. If you want to see your family-run business succeed for decades to come, you need to establish a sound succession plan.
When you consider the future of your family business, follow these tips for successful succession planning:
It’s best to plan when you’re about 10 years away from stepping down, but even five years in advance will work. The longer you can spend on planning, the smoother the transition process will be.
Bring family members into the conversation
You can avoid family discord by encouraging dialogue with your family. Instead of announcing your succession plan, invite them to share their personal goals and feelings.
Consider your family and what’s best for the business
When choosing a successor, don’t make any assumptions. While you may have envisioned your oldest child taking over your small family business one day, don’t assume he or she is your only candidate – or even interested in the responsibility. Decide which family members are viable candidates to lead the business and express your vision to all involved.
Lastly, take time to train your successor. You can make the transition smoother by working with your successor for one or two years before you officially step down.
Less stress, more success
It’s sometimes difficult to blend business and family. However, when you follow the guidance above, you can reduce the drama, foster an environment of communication and respect, and keep your family business strong for generations to come.