Three quick tips for overcoming some of the barriers family groups in business face… David Harland – Managing Director of FINH
Overcoming Barriers To Success In Your Family Business
Family-owned businesses have tremendous advantages stemming from their special status: deep community ties, values, family traditions, and the ability to take a long-term view of success. However, family businesses also face unique challenges. The most successful multigenerational family businesses are able to overcome these barriers, incorporating new ideas while retaining the competitive strengths that made them successful in the first place. Let’s talk about some of the common obstacles that arise in family businesses.
Barrier 1: Failing To Keep Non-Family Employees Happy
Are your non-family employees happy and fulfilled in their jobs? If not, you may be damaging your firm’s ability to retain talent. One common complain that we run across is that non-family employees feel that there is a ceiling to their career progression within the firm. Since they are not family, they may be barred from top positions within the business or think that they don’t have a clear way to move forward in their careers.
If you want to retain key employees (and you should), it’s critical that you make them feel that the firm’s success benefits them as well as your family. Consider allowing key employees an ownership stake or initiate a creative compensation scheme. Bonusing well or offering some share of the firm’s profits can help align their interests with the firm’s and motivate key non-family employees to stick with your firm.
Barrier 2: Letting Family Drama Affect The Business
Though family relationships may be key to your firm’s culture, sour dynamics between family members can be very damaging to business success. One of the problems we see over and over is that family members may lack an avenue to express their wants, needs, and concerns – personal and professional. When family members don’t feel heard by others (especially matriarchs and patriarchs), family drama can spill over into the business.
Non-family businesses have natural barriers to conflict; it’s unlikely for two employees to be so angry at each other that they will overcome workplace boundaries and escalate the fight. Lacking a Human Resources department, many family firms lack formal rules and processes for mediating disputes, making it hard to handle the inevitable spats that can arise between employees.
Though we’ll never be able to completely do away with family drama, formal structures like family councils, boards, and forums offer safe spaces where grievances can be aired and problems mediated. We strongly advocate for formal governance as a way to help a family business retain the values and intangible capital that makes it strong while managing conflict.
Barrier 3: Lack Of Professionalisation Within The Business
I’ve often spoken in this column about the importance of professionalisation in sustaining a family business through generations. Family firms, particularly those within the first or second generation where the founder is still involved in the business, tend to be more casual than their non-family counterparts. The problem is that this informality often leads to a lack of strategic or succession planning, and can limit the business’ access to outside expertise and capitalisation.
Professionalising a business doesn’t mean giving up the values and identity that makes a family firm strong. Quite the contrary: professionalising means making better use of internal resources, separating ownership from management, and creating strategies for the future of the business, among many other things. We teach our clients to associate professionalisation with taking their businesses to the next level of growth.
Family businesses tend to go through predictable patterns of growth and development, and the barriers discussed here are natural parts of running a successful firm. If you’re feeling isolated or frustrated as a business leader, it can be enormously helpful to reach out to other members of the family business community for support.
Want to learn more about the Three Barriers To Success In Your Family Business? Call FINH on 07 3229 7333