Working together in the family business has its ups and downs. While it can be rewarding and beneficial on many levels, the family dynamic brings unique challenges. Even before putting family in the mix, businesses can have serious conflicts that require the owner’s immediate attention. When dealing with family members, it’s critical to identify areas where the lines may get blurred between the family and business organizations. Each organization should be clearly defined and have set boundaries. Each family member should have a place in the family or business organizations. Sometimes, family members have roles in both.
What are the Potential Benefits?
Trust and Loyalty: People of the same family trust each other. They are loyal to the family and will promote a collaborative business environment. Everyone is encouraged to share their points of view and to take calculated risks. There is also a profound commitment to the company’s long-term success.
Shared core values: When families who work side-by-side share the same core values, they are unified in shaping the organization’s long-term vision. When people typically think alike, it’s easier for them to make quick decisions. Since there are fewer management layers, the process is streamlined, and the outcome of the decision has an immediate impact.
Long-term Commitment: The family that works in the business is committed to its success. They have a vested interest in ensuring the company is profitable and continuously growing. The family is willing to go the extra mile to make things happen. This long-term commitment is more evident in tough times that may require sacrifices to move forward.
Succession Planning: Passing the baton to another family leader can ensure the business continues for generations. Families that accomplish a smooth, well-structured transition build on earlier accomplishments that set the tone for future success. Additionally, potential tax benefits make it beneficial to operate the business.
What are the Potential Challenges?
Unclear Boundaries: The boundaries become blurred without a clear separation between a personal and professional situation. This tension can cause conflicts within relationships and change how people interact within the team.
Conflicts in the Workplace: When families argue and disagree in the workplace, it makes employees uncomfortable. It’s harder to make decisions when leadership is angry and unwilling to communicate with each other about business matters.
Favoritism and Nepotism: If non-family employees perceive that family members are promoted based on relationships instead of qualifications, it can cause low morale. Growing resentment among employees can impact productivity and future growth. Anyone not a family member may believe there is limited opportunity for advancement and opt to leave the business.
Inability to be Objective: Evaluating another family member’s performance or aligning with decisions you think are wrong can be emotionally challenging. When the leader makes important decisions based on someone’s reactions, it can compromise the business’s best interests.
Limited advancement: Non-family members who want to advance their careers may have few opportunities to move into a different position. If employees perceive that promotions are based on nepotism, it may result in decreased morale and increased turnover.
Succession Conflicts: Even large companies have disputes about who will be the organization’s next leader. Family-owned businesses often have similar conflicts. When multiple family members are equally qualified to step into leadership, the issues related to succession are magnified.
Actions required to minimize challenges
Set clear boundaries: When family members and employees clearly understand their roles and responsibilities, they have established guidelines to follow. Setting boundaries helps avoid confusion and facilitates a positive work environment. Organizations with a supportive and inclusive culture make employees feel valued and appreciated.
Be professional: Family members should be treated like every other employee. The situation must be addressed professionally if they need to improve their performance. Applying the same standards to the entire organization displays integrity and fair treatment.
Use merit-based promotions: Hire and promote employees based on their qualifications and performance. If family ties determine who gets the job, leaders may overlook the best candidate for the position.
Encourage open communication: Great ideas can come from anyone within the company. It’s usually the employees who work most closely with customers who have insights into the person’s problems or concerns. When employees are encouraged to share their honest opinions, avoiding conflicts and building a constructive team is easier.
Be proactive and develop a succession plan: One of the responsibilities of leading a family business is to create a succession plan. The document should appraise the organization and surface any problems impacting the business’s long-term success. Due to its complexity, the family should consult external advisors and tax experts to assist them in developing a plan. This collaboration is the best way to get unbiased opinions and ensure a seamless business transition to the next generation.
Many independent hardware stores and suppliers are family-owned companies. These are the folks in the industry who understand the rewards and challenges that togetherness brings. Since every family situation is different, these businesses bring a unique perspective on what it takes to succeed in a competitive retail environment.
