Family Business: Ensuring Successful Management
There are many factors to consider when setting up a business such as deciding if you would want to run it on your own, have business partners or make it a family business. According to the Family Firm Institute, family businesses make up two-thirds of business enterprises around the world.
Just like any other business, running a family business requires planning, discipline and a good dose of patience. In the absence of these, the business may collapse well before it gains recognition. While family businesses are major economic drivers, only a mere 30% endure into the second generation, 12% last into the third generation and just 3% make it to the fourth generation.
Several factors lead to the failure of family businesses; an overlap of the personal and the professional, lack of proper communication, a hiring process hinged on familiarity, favouritism and sentiments or just a general lack of interest from family members.
So how can you effectively run a family business? Here are some essential tips that should help-
– CREATE A CLEARLY DEFINED METHOD OF COMMUNICATION
This is where many people make mistakes. You might assume your family members understand you so well that you don’t have to communicate with them about your expectations and the nature of your business. However, if you don’t communicate effectively, you may encounter problems that will lead to lasting difficulties. Start by arranging meetings; you can agree on how often the meetings should hold. In the meetings, make sure you allow everyone air their concerns, address the issues with the aim of resolving disputes if any and determine the way forward.
– ENSURE CLARITY OF ROLES AND RESPONSIBILITIES
From the onset, let every family member’s role and responsibility be clearly spelt out and documented in writing for future reference; assumption is a killer. You shouldn’t assume each person knows what he or she is to do. Identify the skills, strengths and talents of each person, assign the roles accordingly and clearly communicate your expectations. It will make the business more professional, reduce conflicts and improve the accountability of each person.
– MAKE IT FORMAL
It is easy to get carried away when running a family business. Placing too much emphasis on “family” rather than the “business” can cost you the business. You must set some boundaries and the best way to do this is by making everything from dividend pay-outs to disciplinary measures known to all and documented before business operations begin. A business should be business and family should remain family.
– TREAT FAMILY MEMBERS FAIRLY
One thing that destroys businesses is favouritism. Having a favourite family member should not cloud your sense of judgement. Treating every family member with equal respect will help you avoid an unnecessary mess. Avoid setting unequal standards. Everything from pay scales, promotions, work, schedules, criticism and praise should be evenly handed to family members and non-family employees.