From small enterprises like a local restaurant to massive media conglomerates like the one featured on HBO’s “Succession” (and the real-life one owned by the Murdoch family), family-owned businesses can span a wide range of sizes, industries and levels of influence. But regardless of the particulars, family businesses involve a unique array of challenges and considerations for those in charge.
The personal politics surrounding family businesses can easily overwhelm work-related matters, and a steady hand is required to manage both aspects and keep the company strong, focused and effective. Read on for a guide on how to manage a family-owned business and how to handle many of the most common concerns to arise in these situations.
A family-owned business is exactly what it sounds like — a business owned and/or run by members of the same family. These companies and organizations majorly contribute to the U.S. and worldwide economy with 60% of the American workforce being employed by family-owned businesses.
When naming your family-owned business, you must first make a crucial decision: how blatant do you want your family’s association with the company to be? Obviously, using your family name in the company moniker makes a direct statement about priorities and clearly identifies the business with its owning family (notable examples include Koch Industries, Walmart and Ford Motors).
However, some family businesses opt instead to focus their company name on its express purpose (like the Murdoch family’s News Corporation) or to choose something less specific altogether (like family-owned Swiss pharmaceutical company, Novartis). More generic names have the benefit of eliminating complications, should the founding family ultimately choose to divest and sell their company.
To decide how to name your family business, consider how you’d like your business viewed by the public and by the media, and whether family-based legacy is crucial or whether flexibility proves more valuable to your family and to the company as a whole.
There’s a reason why family-owned businesses account for a full 70-90 percent of the world’s GDP: these companies boast numerous benefits for their shareholders, their managers and their employees. The positive attributes of managing a family business can include the following:
If you’re managing members of the family that own the business, those employees have a vested interest in the company’s success beyond their own advancement opportunities and compensations. As a result, they may work harder and more purposefully to serve the interests of the business.
If the business has been in operation for many years, family employees will likely experience a shorter learning curve than their non-related counterparts at other companies.
Family businesses frequently allow for more schedule flexibility than other companies and may be more open to unorthodox schedules, remote-work opportunities and part-time employment.
While the company’s financial wellbeing remains crucial to a family business, the personal closeness between the involved parties can lessen the negative impact of a down investment round or a weak sales year. In this regard, the familial relationships can offset professional complications to a positive degree.
Family-owned businesses can certainly find massive success, but managers of these companies must contend with unique difficulties that don’t generally apply to other work environments. For example:
It can be very challenging to separate professional arguments and conflicts from personal relationships when dealing with family members and friends. Managers must remain on-guard at all times and must view their own interactions with colleagues with a brutal degree of honesty.
Groupthinking, which means making decisions as a group with little critical thinking or individual responsibility, is a common struggle among family-owned businesses. It can cause problems for managers who may disagree with the popular point of view on particular matters, for they’ll often find themselves without the support and the resources to move forward with their preferred modes of resolution.
In certain cases, family businesses have less stringent rules of governance than other companies, which can cause issues with adhering to corporate laws and, in the most extreme circumstances, can lead to legal consequences.
If your family puts pressure on you to work for their business even if your interests lie elsewhere, you may feel resentful and less-than-enthusiastic about your management role, which can in turn affect your ability to succeed in the position.
According to Forbes, the largest family-owned business on earth is the Walmart chain of stores with headquarters in the United States, owned and operated by the heirs of company founder Sam Walton. As of 2017, the company boasted a revenue of $476.3 billion dollars.
Unfortunately, family-owned businesses have a higher-than-typical likelihood of failure. Only 30% of family-owned companies survive their first generational changing-of-the-guard, just 12% continue from second to third-generation ownership and a mere 13% of family-owned businesses are still in operation after 60 years.
Succession planning refers to a family business’s strategy for turning the company over to the next generation. A number of complications can come into play with succession planning; the current owners may feel reluctant to retire and pass their operations along to their children or other younger relatives, creating difficulties on both a personal and professional level.
Succession planning is often overlooked by even highly-successful family businesses; Forbes cites the 2016 Family Business Survey by the National Bureau of Economic Research Family Business Alliance, claiming that 43% of family businesses lack succession plans entirely. But, at the same time, a full ¾ of family-business owners plan to eventually pass their companies along to the next generation.
In order to avoid torch-passing problems, Forbes advises family company leaders to begin succession planning as early as possible. These plans should include the specific family member(s) who will take over, how the transition will occur, and a clear timeline for the current leadership to back away and the new company heads to fully adopt their powers. Succession plans should be put in writing, and all involved parties should be completely briefed on the process, therefore protecting the company from unexpected shakeups.
Our employer partners are actively recruiting women! Update your profile today.