A family business is a business whose and operations lies in a family. A family business is started for several reasons among them being:
- To work with family members
- To create a family wealth
- To build a legacy
A family business, like any other business, is started out of a founder`s vision. However, when running a family business, family dynamics come into play which makes a family business operation more complex.
This course aims to help upcoming and established family business leaders run a successful business by drawing clear lines between business and family relations.
Challenges of running a family business
1. Family conflicts
Family conflicts can negatively affect the smooth running of the business. Some family members cannot draw a line between family relations and business and this derails the family company from pursuing its mission. These conflicts are caused by different individual interests and personal egos. When these issues are spilled to the business, its performance is affected. These issues, if not amicably solved create a hostile working environment for the employees lowering productivity.
Many family-owned businesses tend to hire, promote, and pay based on family relationships rather than merit and abilities. This demoralizes non-family employees, lowering their commitment and productivity.
3. Limited growth opportunities for non-family employees
In many family-owned businesses, decision making and leadership roles rest on the hands of family members. As a result, non-family employees have limited opportunities to grow in terms of promotion and leadership development. As a result, ambitious non-family employees might leave to pursue better opportunities. This leads to a loss of talent.
A family needs a diversity of talents to grow. Family members might not possess all these talents, and therefore a family business needs to provide growth opportunities to non-family employees.
4. Lack of a clear succession plan
The family business leader might exit as a result of sudden death, sickness, or voluntary retirement. Someone else needs to take over the leadership role of the family business. Without a clear plan to identify a successor, you are setting up your business for failure. Siblings might fight for control of the business and it is therefore important to identify a potential successor and groom him/her for the role.
5. Letting emotions interfere with business
Separating emotions from the business is not easy especially when you are managing a family member. It is difficult for people to give critical feedback to family members.
As a family business leader, you should draw boundaries between personal emotions and business issues.
How to overcome these threats
A family business faces many threats due to complex family dynamics that might affect business. However, these threats can be managed through the following ways:
i) Define roles and responsibilities and hold people accountable.
ii) Communicate the company`s vision and ensure everyone works towards that vision.
iii) Provide growth opportunities for both family and non-family employees to create a diversity of talents.
iv) Hire, pay, and promote based on merit and abilities instead of family relationships.
Choose your successor
Passing your business to your children is a good way of cementing your legacy. However, do not pass your business to your children unless they are interested and can run the business. Not all of your children might be interested in being involved in your business. Some of them might not share your vision for the business.
It is therefore important to identify a successor who shares your vision and start grooming them for the role. One way to prepare your potential successor is by sharing with them your strategic vision and through mentorship and internship programs. Your successor might join your company at a junior level and rise through the ranks. This will help your successor learn the business operations. It also prepares your employees for a change of leadership.
Preparing your business for succession
You not only need to prepare your successor but also your business. Your business should also be prepared for the leadership transition. Your business and your employees are used to your leadership style. Your successor might share your vision but their personality and leadership style differ with yours.
Your successor should be introduced to the business early enough, for example, three years before the transition. Your successor might join the company at a junior level and rise the corporate ladder. This will make the business and the employees used to their future leader and once the successor is ready to take over, there will be a smooth transition.
You need to delegate effectively to ensure good leadership at all levels. The successor will take over a strong organization and will be ready to take the business to the next level.
Handing over the keys
Once you have groomed your successor and prepared your business for this critical stage (succession), you need to give your heir a taste of leadership to test whether the business is ready for the official transition. Take a vacation, say one or two months and let the business operate without you. If you come back from vacation and find chaos, you need to go back to the drawing board. If nobody misses you, and the business is running smoothly in your absence, you did a great job! You are now ready for retirement and the business is ready to go to the next level in your absence. Now it`s time to let your heir run the show. Go enjoy your retirement and retirement benefits. You earned it!!