Last month we discussed how open, honest and clear communication is so critical to family business success. This month we highlight a few of the hot spots that can spark trouble in a family business. – David Harland, Managing Director of FINH
1. Be mindful of non-family employee relationships
One of the major pitfalls that family businesses can fall into happens when they hire non-family employees. It’s critical to the health and success of your business not to create a sub-class of employees who are not family.
Treating non-family employees differently or handing out special favours to family can be serious de-motivators and set a terrible example.
Worse, employees who feel that promotions or future success are out of their reach because they aren’t part of the bloodline aren’t likely to stay long.
Some common mistakes that you want to steer clear of are:
- Letting family work from home but requiring non-family employees to show up to the office.
- Giving family members extra perks like use of the company car.
- Having different vacation or medical leave policies for family members.
- Having different hiring and promotion practices for family members.
2. Don’t abuse family relationships
The other side of the family/non-family coin is expecting more from relatives than you do employees. Who would you call to work overtime when the business needs it?
If you regularly expect family employees to work extra (unpaid) time, then you may be mistreating your family members. Every growing business routinely confronts the need for more hands in the kitchen; it’s unfair (and potentially harmful to family harmony) to always expect the family to shoulder the extra burden.
It’s also not uncommon for overtime to fall disproportionately on certain members of the family. Whether it’s the unmarried child who gives up her weekends or the eldest sibling who always seems to put in the extra hours, these unspoken expectations may reflect underlying family dynamics that can blow up in harmful ways.
Avoid creating family strife with these tips:
- Explicitly negotiate overtime expectations with your managers and employees.
- Split overtime among multiple members of the family so it’s not always the same people pitching in.
- Document extra hours so that it’s clear who has done what (and when new employees need to be hired).
3. Love, honour and respect your “co-preneur”
Couples who run businesses together face an especially challenging balancing act. On top of raising a family and navigating the natural shifts in a relationship over time, business-owning couples also have to handle the added stress of running a business.
Every couple needs to find its own way to stay sane and stay happy within a co-preneur relationship. Some couples take responsibility for different parts of the business so that they aren’t working too closely together.
If you can’t separate work and family time completely – and most couples can’t – it’s critical to set some ground rules. For example:
- Discuss job roles and expectations as the company grows.
- Don’t drive to and from work together.
- Work in different spaces or alternate days at the office.
- Set a daily deadline after which no work will be discussed at home.
- Schedule time for your relationship so that you don’t lose the love.
- Find a neutral person (such as an advisor or counsellor) to vent with.
4. Leverage formal structures like family councils and family retreats
If you’re always working in the business, you’ll never find the time to work on the business. The same goes for family. Though members of a family business may work and play together, they often find it hard to make time to discuss the tough topics.
The problems might be logistical in nature: it’s hard to get everyone together. Or it might be difficult to keep the family group on track in wide-ranging discussions. Creating a specific (and safe) place to discuss major business issues and air grievances will help clear the air and keep small problems from boiling over into crises.
The goal of a family council or retreat session isn’t to handle daily business affairs, but to address macro issues like strategy, governance and family affairs. Council meetings and retreats are an opportunity to get together as a business-owning family and address the big-picture issues.
In our experience, families have used councils and retreats to address issues like:
- What’s next for the business?
- How will future capital needs (expansion, succession, retirement, etc.) be satisfied?
- Who will take over the business?
- How is ownership vs. employment determined?
- What is our vision for family wealth?
- What is each family member’s individual plan for success in the business?
- How can we resolve a conflict that has arisen?
Bottom line: Family businesses bring together all the joy, shared vision and stress of a family. Over time, we have identified many of the common pitfalls that can await unwary family business leaders.
Keeping these tips in mind can help you avoid these common mistakes and keep your business focused on success.
For Advice on conflicts and communications in your family business please call FINH 07 3229 7333