Whether it is changing economic conditions, a lack of capital, or just general competition, every business is threatened by something. Family owned businesses experience these challenges as well, but they also have their own unique threats.
Here are some of the more severe threats, along with tips on how to manage them:
At some point, a member of the team may retire, leave or even worse, die. Just imagine what would happen to a business if there was no succession plan in place for the unexpected loss of a key member, or worse, the only member of the team. Research shows that nearly two-thirds of family businesses do not survive the transition from first generation to second generation. Some of that failure is attributable to the next generation not having a desire to carry on the business, but more importantly and significantly, it is due to poor transitional planning.
Family businesses are faced with the challenge of internal conflicts that come about from the inability to separate business and personal lives. The feud could be for a host of reasons, such as varied interest, difference of opinion, or personal rivalry that works its way into the business. Whatever the cause, it is important to work through these conflicts as achieving common goals will become increasingly difficult, and the stress placed on staff may cause them to leave.
You may recall this line from The Godfather –“It’s not personal, it’s business.” This is easier said than done, especially in a family owned business, and especially if you are managing a family member. Emotions do become personal, and allowing them to run the business can significantly interfere in your interactions with employees and customers. Your emotions could make you appear weak, and severely affect your ability to make sound decisions. On the other hand, if you appear cold and insensitive, you may be regarded as unapproachable. You will need to determine the right balance of emotion based on the dynamics of your business environment.
There are two main reasons non-family employees will leave: limited growth opportunities and family conflicts. Unfortunately, there are usually limited opportunities for advancement within a family owned business, as family members typically occupy many of the management positions. Without the opportunity for advancement, many of the top non-family talent will leave. As a family business owner it’s important to realize the value and balance that non-family members bring to the business. They have the ability to view the organization from a neutral ground, and if they are given the opportunity, they can be a huge asset. If a family business owner fails to recognize this, they might miss the opportunity to strengthen the business.
Many family owned businesses have a tendency to hire, promote and pay someone based solely on the fact that they are part of the family, rather than on their actual merits and abilities. This is a recipe for disaster. A family owned business must recognize actual merit no matter who expresses it. Non-family members will quickly lose motivation and their desire to work if they observe this type of behavior from the owners. In addition, non-family members may also become complacent and fear no consequences for the under-performance or non-performance of a given task.
These mistakes can spell disaster for a family business, so it’s critical to create a strong and respectful team environment for family and non-family employees. Prepare for the future of your business, and stay focused on the overall company needs and goals. Carefully balance emotions and work through conflicts to maintain a healthy operation.
If you have any questions pertaining to the future of your business, fill in the form below and we will be in touch.