By Emmanuel Zvada
FAMILY businesses are an important part of the economy, and running one comes with unique challenges and rewards. These companies are good, not only for the families, but also for the economy. Family-controlled businesses are firms that are under the ownership of families and, in most cases, management is under a single founder, owner or close relatives.
It is crucial to note that a family business can eithnepotismer prove to be a blessing or a curse, depending on how you manage it. With the little experience I have with a few families running businesses, l will share some insights on how one can successfully run a family business.
Separating personal from business issues
One of the biggest challenges in running a family business is separating business from personal issues. For example, when you work with your spouse, sibling or child, it can be tough to keep your personal relationships out of work and vice-versa.
You may find it helpful to set parameters around when you focus on your personal relationship, and when you focus on the business.
In most cases the challenges you face are a result of the fine line that separates family from business affairs.
If you are the owner of the business, leave personal matters away from your business and business matters from your personal matters.
One of the most common issues in a family business is the pressure to hire a relative. The emotional aspect of family relationships can make it difficult to turn down the request.
Try to make the decision based on what is best for the business and not your relationship. If you hire a family member, it should not affect the relationship that you have with other members of staff.
Nepotism is a form of favouritism in business where family members are favoured over non-relatives.
While it is a given that a family-run business will employ family members, nepotism, like all forms of favouritism, still has repercussions.
Moreso, some family businesses can fall into the trap of promoting family members to senior management roles, even when it may be clear that the individuals do not have the required education, experience or skills to proficiently carry out their responsibilities.
In such situations, it would be prudent to place qualified non-family members in these positions.
Preferential treatment of family members within an employment set-up should be avoided because it takes the route towards nepotism.
Salaries and compensation against industry standards
Another challenge frequently encountered by family businesses involves payment of salaries to and dividing the profits among the family members who participate in the firm.
In order to grow, a family business must be able to use a relatively large percentage of profits for expansion. But in most cases, the owners may not see the value of investment that reduces the amount of dividends they receive.
This is a source of conflict in many family firms and an added difficulty in making the necessary investments in the business for continued success.
To ensure that salaries are distributed fairly among family and non-family employees in such organisations, business leaders or owners should match them to industry guidelines for each job description.
Avoid micromanaging, empower and involve your people
The best owners of family businesses know they cannot meet their goals alone, hence they need the right people to be doing the right things. Leadership means delegating the right people to get the job done and it is not about doing everything yourself as the owner of the family business.
You need to get your organisation to a point where resources other than you can operate with efficiency and to your expectations even in your absence.
Be clear on assigning tasks
Define roles clearly in the company. If you are going to give them a certain amount of power and authority, define the boundaries.
When it comes to power and boundaries, following and exercising them affect both you and the person holding them — the moment they decide to exercise their authority, you have to respect them.
The only time you can interfere is if a family member exceeds their power or if the consequence will be too dire. You gave them the right, and now you have to respect that right. This is why you have to carefully plan and explain clearly the different roles and powers each has in the business.
Get everyone involved in the process
The best thing about having family members in the business, which cannot be overstated is the fact that you have your team in the process.
A family that functions well and supports each other will make a great team in running a business.
Everyone will be thinking of how to grow the company for the benefit of stakeholders and reason for the creation of the business — the family.
You also have your constructive critics who are willing to step up and pin-point decisions that may harm the company. A united family builds the business even bigger, which, in the process, will help every member of the family.
Succession planning is key
Succession is one of the most difficult challenges that family businesses face and can become a challenge when the older generation does not give the younger generation room to learn, develop and grow.
Succession planning is an important issue to consider for any small business. Consider who will take over if something happens to the family member who owns or manages the business.
A clear succession plan can guide your business through a change in management, and can help you avoid conflict.
However, many family business owners fail to come up succession plans, be it they feel that it is not needed until further down the line, or they refuse to admit that time will come when someone else will need to take the reins.
The reality is that illness, death or even scandal can require a family business to appoint a successor in a very short space of time. Without the right plan in place, it can be very hard for a business to move forward in such an event.
Working in a family-run firm requires a lot of flexibility. While non-family businesses tend to have very clearly delineated responsibilities for every role, family members will sometimes be required to wear several different hats, taking on tasks outside their formal remit where needed.
Family businesses still thrive in today’s competitive economy.