Managing the most difficult aspects of a family business

Family businesses can enjoy significant competitive advantages over other businesses because of the unity, commitment and long-term vision of its leadership. However, the family nature of these businesses, while being the source of such a lasting advantage, can often become the very reason for its loss.

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

Discussing how to run your business is a key part of your business plan. For example, if you are developing a brewery business plan for a multigenerational business, it would be critical to determine how the HR strategy will affect both family and non-family employees.

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

Talent development

It is of the utmost importance for a family business to nurture the next generation for future leadership positions. You need to have a comprehensive talent development plan in place. A program that will instill in the next generation a sense of pride in their family heritage while giving them the skills to run the business. Due to the lofty goals of the Talent Development Plan, preparations must begin early. Engage the next generation in family business discussions while they are still in college. Communicate with them regularly about the business, so that they understand what goes into starting and running a business. This will help them paint a realistic picture of what it is like to work in the family business.

Equally important is having procedures in place for how the next generation can join the business. Emphasize the importance of skills and abilities to eliminate favoritism. Set these guidelines in advance and communicate them clearly to the next generation. They will be able to soak up these standards as they mature, leaving no room for ambiguity or unpleasant surprises. Additionally, talent development policies that prioritize abilities over family biases will ensure that roles are filled by talented and interested people and not by someone who does so only out of pure family obligation.

Finally, make sure you know how you increase the productivity of remote workers as work from home options proliferate.

Performance management

To effectively manage employee performance (family and non-family), family businesses must first and foremost clearly communicate professional expectations. From creating detailed job descriptions to conducting frequent performance reviews This will allow employees to clarify their goals, which will make the performance review process fairer and more beneficial to the employee and the organization.

A performance problem specific to family businesses is that of under / underperforming family managers. It is a delicate question which must nevertheless be resolved effectively to maintain the good health of a company. One way to approach this problem is to appoint non-family leaders to oversee the family frameworks. Clear policies must be in place to support and encourage these non-family employees to assess family members without any embarrassment or apprehension.

Training opportunities or performance improvement plans should be offered to struggling employees. If all else fails, a dignified exit strategy must be planned for said employee. The insistence on keeping a non-performing family member in the business can upset other employees (especially non-family members). Seeing such a blatant display of family biases can lead to attrition of top talent. It will also have a negative impact on the larger culture of the organization.

Organizational culture

Sometimes, certain complex interpersonal dynamics can cause family businesses not to tackle important issues like the ones mentioned above. Such avoidance tactics might temporarily spare a few family members some discomfort, but it will definitely put the business at risk. Family businesses need to have strong processes in place to help them discuss these complex but relevant issues.

Create an organizational culture where no problem is off limits. Encourage everyone, family and non-family, to ask questions and discuss any issues that they believe impact the business and need to be discussed. Other than that, a lot of family businesses over the years become rigid in their ways. They favor traditions over change which sometimes causes irreversible damage to the company. Strive to develop a culture that embraces change and transparent communication to create a business that grows stronger with each generation.

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