4 Ways to Improve Family Business Operations

by QuickBooks

5 min read

Family-owned businesses — any business in which two or more family members are involved and the majority of ownership or control lies within a family — play an important and dynamic role in the United States economy. In fact, according to the U.S. Bureau of the Census, about 90 percent of American businesses are family-owned or controlled and they account for half of the nation’s employment and half of its gross national product.

What if you were part of a family that had a small business? Seemingly, you would have it made. Your future would be set as surely there would always be a job for you. Your only concern would be which job. Sounds great — right? Ahh, if only it were that simple.

Below are four challenges that often arise in a family business — and how you can fix them.

1. Setting Boundaries

Just as fences make good neighbors, boundaries make for professional work spaces. But those boundaries are harder to create and live by when working with family. After all, people feel more comfortable with family, which makes it easier to cross these lines. This breakdown can lead to outbursts and emotions which will inevitably spill into the personal side.

Yet, boundaries are even more necessary and rules must be set and abided by in a family business. Without clarity, resentment can arise. Family members start questioning one another and everyone has to take a side. Close relationships are flammable and relationships can be harmed. These emotions can spill over from the professional to the personal and the family dynamic could be damaged.

You can set boundaries by making sure everyone knows their role and their responsibilities, and those of other people in the office as well. The clarity will help everyone to understand that no one person — even a family member — is beyond accountability. Also, save personal disagreements for private moments. Don’t play out family squabbles in front of the team.

2. Recognizing Work-Life Balance

The term work-life balance implies there is a separation between the two. While it’s natural that there will be some overlap, the challenge to balance one’s personal and professional lives is much greater when working with family. Just as work hours are not the time to discuss the family vacation, family time is not when to discuss the rollout of a new product.

When you work with family, it’s important to dedicate some time outside of the workplace when you can discuss personal matters.

For example, Justin Meyer works in his father’s law firm. They are the only lawyers in a four-person firm that specializes in estate planning/administration and business law for small business owners. Meyer and his father eat lunch together regularly. This is their time to discuss personal things. Knowing that they have some personal time during the workday enables Meyer and his father to keep it on the professional level during business hours.

However, once they get home it’s not as simple. Despite their best efforts, work talk comes up regularly and is only stopped with dirty looks from other family members. Enforced moratoriums and being held accountable to them by family members is a good way to avoid work talk.

3. Planning for the Future

Succession planning – the process an organization goes through to determine how to handle personnel changes — is a complex issue in any business. However, it can be eminently more so in a family business. In a Forbes article, author Carrie Hall says, “Succession planning can be a very emotional issue and rife with discomfort for both current and future family business leaders.”

For a smooth transition to take place, you should follow a number of steps. First, the leadership transition needs to be a formal discussion and not something discussed while watching the football game. It’s best for the family member in charge to leave clear instructions as to how he/she wants the business to proceed in his or her absence. Any vagueness can lead to confusion and frustration. A conversation with both family and non-family employees about succession should take place since they are impacted as well. Succession should be part of the business strategy and integrated as such.

Meyer and his father have spoken about succession and are on the same page. “When issues come up and decisions have to be made, my dad makes sure I’m comfortable because he knows the business will be mine.” Certainly, the fact that there is only one family member involved makes the transition less opaque. With Meyer’s sibling having no interest in the business, the decision for Meyer to succeed his father was a simple one.

4. Considering “The Others”

It’s natural for family members to feel more comfortable and familiar with each other. This may very well come through in the workplace and make other employees uncomfortable.

It’s conceivable that those in the office who are not part of the family could feel like an “other” and ultimately become unhappy employees. After all, they are not sitting at the table for Sunday brunch. Making non-family employees feel like they’re not part of the team is detrimental to the goals of the workplace. Creating a pleasant and productive work environment means having a team-like atmosphere where everyone is valued and appreciated.

So, what can families do to show the others in the office that they are valued? First off, simple appreciation of the work being performed goes a long way. It also helps to maintain professionalism and respect. In addition, financial compensation and opportunity for promotion should be available. Employees need to feel that the spots at the top of the ladder (or at least close to the top) are not simply reserved for those with the same last name.

Meyer is well aware that those outside of the family could feel like “others,” but he takes certain measures to address this issue. “I don’t call my father ‘Dad’ in the office. I call him by his first name. People say, ‘Isn’t that your dad?’ but in the office he’s Bruce – that’s his name. Others recognize what I’m doing when I do it.” He also notes that half of the office staff attended his wedding, and everybody in the office came to his grandfather’s funeral.

You can make a family business into a winning work situation, but it means meeting the challenges head on with practical solutions, so your office can truly operate like “one big happy family.”

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