For some, they believe working in a family-run business means a more relaxed working environment and a ‘one big happy family’ feel. Whilst some family-run businesses may well treat all their staff like a member of their family, it’s not that frequent. More often the challenges outweigh the benefits. However, having said that, some family businesses do it very well and are a pleasure to work with. If you are a family-run business and not in that ‘pleasure to work with’ minority, then you might get some tips from the below pointers. There is always room for improvement IF you are willing to change and do things better.
Challenges of a family-run business and solutions
Hiring family
I’m not a fan of hiring a family member or friend unless they would have been hired anyway, due to their excellent skills and experience. Having your sister (who has very limited bookkeeping skills) do the bookkeeping purely because she needs a job is not wise. Giving Uncle Rob the job of senior salesperson because he’s “got the gift of the gab” and helped you out as a kid isn’t a good enough reason to trust this person to such a critical role. I always say to my business coaching clients – if they were not a family member, would you still hire them? Do they have the skills, personality and traits that you need in the business and in that particular role? Plus, if you hire your mum, son or niece and they don’t work out – how will you go sacking them?
Lack of experience or skills equates to loss of profit
When you do hire people who don’t have the right skills or experience, then you not only put stress on yourself but also your other team members. They frequently find themselves having to cover for these people and ‘carry’ them in order to keep things going. As the business owner, you will experience increased stress levels as mistakes occur, inefficiencies are prolific and profits are eroded. Customers may not always return and you may develop less than the best reputation. Your clients and customers won’t care if it’s a family member when a blunder affects them in a negative way; they will simply do business elsewhere.
Unfair pay levels
There are two main issues here; either the family member is underpaid or overpaid. Sometimes family members simply ‘work their butt off’ and get paid the bare minimum and frequently not the overtime they do. In other instances, they are overpaid. In this case, particularly if a person is being overpaid and there are other team members aware of this, they feel ‘ripped off’ and disadvantaged. The business also is being disadvantaged; it’s paying a premium in wages and not getting value for money. Salary levels should always be confidential, but invariably it does get out and any disparity between employees will breed ill feelings.
Family dramas
Over the decades I’ve worked with quite a few family-run businesses including husband and wife teams. As a business coach, I’ve advised them to refrain from “fighting in front of the kids” as I would put it and not have disputes in front of staff, or worse in front of clients. Working with the person you live with or family has a different dynamic. You might say something to a spouse that you would never say to a co-worker. I’ve worked with many couples around informal rules and strategies they should adopt because they are family members working in a business together. It can be made to work, you just have to set boundaries. Some families have other issues; such as competitive siblings trying to vie for position and undermining their work colleague siblings. I’m not saying this doesn’t happen with non-related workers, but it seems to occur more where there is a history of family conflict. Conflict resolution practices should be implemented in the workplace, but family-run businesses frequently do not have these policies.
Pressure to hire a family member
Often there is pressure on the business owner/s to hire family. Parents putting the pressure on “your brother really needs a job” or “your family needs you” can be really difficult to say no to. If you have a genuine need then put the position out there as a job; the family like everyone else applies and whilst he might earn a few points being family (or perhaps lose a few because he’s family) you are considering who is best for the job.
Sacking a family member
Mum or sis or Uncle Bob just are not performing. You know this person has to go, but how do you sack your mum? This is the person who gave you life and helped get you to where you are. You owe her. Or perhaps if you sack your sibling, you’ll get a real ‘razzing’ from your parents at Sunday dinner. This is incredibly hard and one of the reasons I warn business owners to seriously consider hiring family. Firstly, I believe you need to be clear at the time of employment that they can be sacked. They need to know there are expectations on their performance and rules to be adhered to (like actually turning up to work on time). A family member (like any other employee) should get warnings and guidance on how to improve, but if they will not, then it may be time to suggest it’s time they move on. If you start the relationship on a professional level, are clear about the ‘rules’ upfront, are fair and give them the opportunity to rectify, then if they chose to not do so, there is that consequence. You may have to be thick-skinned for a while at family events.
Informal culture and structure
Now whilst this may sound appealing, there are some very strong disadvantages of a business being too relaxed, too informal, lacking structure, strategy and lacking systems. These are all traits of a strong and healthy business and whilst a slightly informal and friendly culture makes for a pleasant working environment, remember that you are in business to make money and sometimes too much of a ‘chilled’ workplace won’t equate to efficiencies.
Lack of documented goals, plans and systems
Systems and processes ensure consistency and best practice, so the lack of these means people may not really know what you want done and how best to do it. Without documentation, policies and goals – they are unlikely planning for success. They might achieve it, but they have substantially reduced their likely rate of success. Every strong business is clear on its short and long term goals (which are written down and reviewed regularly) and it has documented processes and systems. Payroll is always processed by noon on a Friday; not because Aunty Betty likes to go home at lunchtime and have a short day, but because that is the plan and schedule of payroll processing. A sale is approached in the same manner and using the same templates. Terms and Conditions contracts are sent to clients in every instance; not missed because the boss’s nephew doesn’t feel like doing that. However, before the family members can ignore the systems, you actually need to have systems.
Paternalistic approach
The head of the family is likely the head of the business. It may well be that this person comes from a culture (or is of an age) where ‘children are seen, not heard’ (whether 3, 33 or 53) and certainly has traditional beliefs. Control of the business is centralized. Tradition rules, rather than good management principles and new ideas are quickly squashed. I know a number of well-established businesses who fall into this category and the patriarch believes that a successful business does not need a website – as one example. Times change; but invariably the belief remains that they know best and are unwilling to move with the times, adapt or embrace change. A generalization of course; there are always exceptions.
Presence of confusion
Above I talked about documented processes and systems. The lack of these equates to confusion. If you don’t have PDs (position descriptions) and systems and processes, then people (family or otherwise) may not know clearly how to do things and what the expectations are. When there is a lack of direction, then people make up their own methods. Some might be ok, others may certainly be lacking. These potential inefficiencies and inconsistencies are not only frustrating for the team and the owner/s but also for customers. Communication (or lack thereof) may also be an issue.
Lack of Training
Hand in hand with a lack of procedures will be the lack of proper training in the workplace. Couple this potentially with people who have come in with a lack of skills, then you can’t be surprised that the business is not firing on all 8 cylinders. This lax approach will affect both family members and non-family members who also won’t be receiving any training. Every business should have assessed the skill levels of its team and prepared a training plan and schedule. Most small businesses however don’t have this; family-run or otherwise.
Rules are not for everyone
This is common in every family-run business. The family members think they are exempt from the rules. I had my sons working for me at various stages and albeit young, one of them said “mum you can just do my timesheet?” My response: “You do what all the other staff do; you do your own. No timesheet, no pay!” I wanted my children to learn the ways of the real world and business. However, that does not always happen. I even had a case where the son of the boss would have afternoon naps on the couch and everyone was afraid to tell the boss. No ‘normal’ employee would ever dream of doing that whilst the boss was away. Rules exist for a reason AND the rest of the team feel (rightly so) it’s unfair that there is one rule for ‘us’ and one rule for ‘them’.
Family gets a tougher go of it
In some cases, the opposite occurs and the ‘boss’ wants to be super clear that the children or family are not getting any special treatment and in fact they are disadvantages. Everyone else is expected to give 100%; they are expected 110%. Other team can make a mistake (they are human) but the family are given no forgiveness; they are held to a higher standard. To get ahead or be taken truly seriously they will likely find themselves seeking employment outside the family-run business, which of course will be taken poorly; that they are deserting their family who did so much for them and gave them the good life they have.
Lack of advancement
Frequently in a family-run business, family members get priority in respect of advancement. This is not always the case, but it’s rather common. So for someone aspiring to advance and grow in their career, they may not select a family-run business. For this reason, the business may not access the best workforce possible.
External view is lacking
With a closed amount of input from a small group of people who invariably have the same exposure to knowledge and information comes a limited view. A strong business needs external views. A fresh set of eyes but as importantly, but more importantly is the willingness to have an open mind, listen and be willing to consider alternatives.
Higher staff turnover
With all the above challenges, invariably a family-run business has a higher staff turnover. Anyone who is familiar with business management understands the negative impact of staff turnover. Essentially it costs 2.5 times a person’s annual salary to replace them. High staff numbers leaving cut deeply into a business’ bottom line. Staff see family getting away with flaunting the rules, they miss advancement opportunities and generally are sick of the moods and family disputes and just up and go. Given the reputation (generally) of a family business it makes it hard to recruit the best; some people will just give a family-run business a wide berth and not take the gamble.
Lack of vision
This can occur in many ways. There may be vision by one person who does not communicate this to the team (or Board) or a number of family members consider the business their own and each have their own vision for the future of the business and so a single and clear direction is not present. Limited vision or lack of knowledge can mean gaining business, new opportunities, attaining funding or diversifying are not occurring in an optimum way. Again, this can occur, and often does, in any business.
Succession Planning
This is a whole can of worms. It may be that the patriarch assumes the children will take over. The children may have no desire to do so or lack the skills to do so. This subject can often be the source of heated debate. It may be that the daughter has a passion for the business, but the mindset may be that it’s better for a male to be running the business. There may be a number of junior family members vying for the position of ‘top dog’ and each things s/he is most suitable; causing competition and ill-feeling amongst family members (who are also work colleagues). Other family members get involved in the debate, declaring their ‘Johnny’ or ‘Janey’ is best suited to take over. In the event of a sudden death of the patriarch, there is invariably nothing written and certainly no documented instructions and often no handover. With lack of documented systems in all in that person’s head, which literally gets taken to the grave. If incoming owners push too hard, they are knocked down and given the family dynamics, will often not dispute or challenge the patriarch. In the case of a handover, this is often left till the last minute as the outgoing person struggles to let go of the ropes. I’ve seen some instances when even handing over the business to the children, the outgoing owner, still refuses to divulge certain information; “you don’t need to know that”. Lack of planning and strategy lends to instability to the business.
With over 30 years of experience helping Australian business owners, I provide business coaching to service-based businesses in a range of industries. If you’d like to learn more, give me a call on 0411 622 666. Yes, I do work with family-run businesses.
