Keep your family business healthy by staying away from these no-nos.
1. Bringing family issues to work
We’ve mentioned before in a discussion about how to best communicate within your family business, but we’ll say it again: There really is a proper time and place to handle family issues, and the workplace is not one of them.
The workplace is for business conversations. It is not the ideal environment to discuss personal or family problems.
When you bring individual issues into the office, you run the risk of letting non-business factors cloud your judgment, which could lead to poor decisions that negatively impact you, your staff, and your bottom line.
It can also negatively impact the morale of yourand in some cases force them to take sides on issues that are not relevant to the operation of your company. Nothing can damage a family business faster than injecting family problems into the workplace.
Favoritism in general is something that employees look unfavorably upon. In family businesses, nonfamily staff is even more sensitive to the topic because it is assumed that family members are the favorites.
With heightened staff sensitivity, family business owners and managers have an uphill battle when fighting favoritism, which is why you should always be aware of how your decisions appear internally.
Something as small as not speaking up about a family member arriving consistently late to work can irritate your staff and lead to bigger issues down the road.
What you can do to avoid being perceived as playing favorites:
- Make a conscious effort to base promotions, raises, and other rewards solely on performance.
- Request honest assessments from your employees and create an atmosphere where your staff feels comfortable coming to you with issues.
- Ask yourself the following before making a decision: “If I was an employee, would I perceive this as unfair? Do the facts and/or numbers back up my decision?”
- If you are grooming a family member to eventually replace you, be sure that the person has the skills necessary to fill your shoes. Nothing can damage a family business more than picking someone that is not qualified to take on your role.
The key to remember is that perception is reality.
Even if you don’t feel that you’re favoring someone but your staff does, you still have a favoritism problem to deal with. If you don’t attempt to resolve the issue, then anger and resentment could poison your company’s culture.
3. Lacking a succession plan and anplan
All companies must have succession plans, and a family business is no different.
The day will come when the CEO, CFO, or other high-level executive will leave the company, and your family business needs to be able to hit the ground running upon their departure. If you haven’t been developing superstar employees to take these top positions, your business could struggle to move forward.
There are a few things you should keep in mind while developing your succession plan.
- That your children or family members have the managerial skill set needed to run the business
- That your family members will want to run the business
- That your employees will be happy if you select your children or other family members to take over (this speaks to the favoritism issue above)
Equally as important as the succession plan is your exit plan. To ensure that your business continues on after you’re gone and that you have enough money to retire with or move on to your next venture, you must begin making your business buyer ready today.
If circumstances forced you to sell your business tomorrow, would it be attractive to potential buyers? Here are some signs that signify your company isn’t:
- The business could not operate without your knowledge or personal relationships.
- The majority of your revenue comes from one or two customers.
- Your financial statements are not in order.
While it’s easy to get caught up in the day-to-day responsibilities of running a family business, your company’s future success and your financial health depends on your development of a succession and exit plan.
Without these things, your family business could run into unnecessary trouble. Generational Equity has learned throughout years of helping family-owned businesses work through succession issues that open and honest communication is the key.
If you are planning an exit in five years or less, you need to begin grooming your replacement(s) as soon as you can. The first step if your replacements are family members is to discuss this and make sure that everyone is on the same page regarding your succession.
Learn what you need to know about preparing your exit plan. Download a complimentary whitepaper from M&A advisory firm Generational Equity called Exit Planning Basics: What You Need To Know Before You Start.