Conflicts are a normal part of every business, but family-owned businesses present a unique set of challenges. It’s quite common for business issues to spill to the family realm and vice versa, infecting both types of relationships.
Dealing with these complex relationship issues should be a fundamental part of your business plan. The problems are inevitable, so plan for them in advance.
- Establish a hierarchy – Every business needs a clear chain of command, so the company runs smoothly. Grandpa may be the family’s patriarch, but if his daughter runs the business, she should be obeyed at work. Grandpa shouldn’t get in her way, and the employees shouldn’t defer to him. Define this hierarchy based on each person’s contributions, skills, and the business’ needs.
- Everyone should be working – The fastest way to breed resentment is to put someone on the payroll who doesn’t contribute. Every employee should have clearly defined (ideally written) responsibilities as part of your hierarchy. Give everyone a title and job description like any business would.
- Don’t create de-facto classes – It’s easy to treat family members better than your non-family employees. If you treat each group differently, you’ll create a division in your workforce. Make sure everyone receives the same treatment, especially when it comes to performance reviews, raises, new responsibilities, rewards, reprimands, termination, and compensation.
- Communicate openly and often – Don’t announce a new initiative or process at a family cookout when your non-family employees aren’t in attendance. Don’t sneak management-only information to your non-management brother. These types of miscommunications handicap your business and push your non-family employees to the outside. Lay everything out on the table with strong communication.
- Be honest with your employees – Don’t hide the fact that you’ve hired family because that secret will come out. Be prepared to honestly explain to your employees while you hired a family member. (That means you should have a good reason.)
- Don’t confuse family business for business-business – Avoid doing favors for family, like letting them borrow company equipment, using vendors to get deals on products, or using other employees for personal tasks. When the family members use business resources for personal gain, the non-family employees will feel like they’re being treated unfairly or under compensated.
- Establish boundaries – When you share your life with the same people you work with, it can feel like work is always with you. (This is especially common for husbands and wives.) Build and enforce boundaries to protect your relationships. Create some simple rules like “no talking about work at home,” or “always obey the hierarchy” so everyone gets along.
- Use a family council – One of the biggest challenges family businesses face is a misalignment of goals. Maybe some want to grow and run the company forever while others want to sell it off. If everyone isn’t working toward the same goal, the business won’t be as successful as it could. A family council is a group of the family (who may or may not be employed with the company) who meet regularly to discuss the business’ goals and strategies. The council simply plots the course; it doesn’t steer the ship. Once the course is set, the established hierarchy runs the show.
Don’t let these tips scare you: Once you get the past the challenges of working with family, it can be a rewarding experience as long as you plan ahead.
Bob E. Teittinen
Commercial Lender, Senior Vice President