Six Situations Where Family Practices Can Hurt Your Small Business
Most contracting businesses are family owned and operated. Family and business can be almost impossible to separate. While I don't claim to be a family business expert, while practicing the art of consulting, I have fired a lot of sons, moms and dads- or redesigned their job descriptions. During my 30 years of consulting, I have learned that fixing business may mean fixing or adjusting the role family members play in that business. Here are some of the most common pitfalls I have encountered:
Number 1: Creating a position in the company to make room for a family member rather than filling the needs of the company with a person who has the appropriate skills and abilities.
Every business has the need for good people and those job positions require certain skills and abilities. Promoting a family member into a position where he is ill equipped to handle the job is unfair to both the company and the individual. It is unrealistic to have a spouse who worked in retail fill the job of administrative assistant or to have a son or daughter who did poorly in school fill an estimating job that requires a great deal of math or computer skills. So what's the solution? Create a job description including skills and tasks required for the position. Have a clear understanding that the family member applying for this position must learn these skills to perform the job.
Number 2: Expecting poor family boundaries not to spill over into employment may be unrealistic.
Parenting is a difficult task and there were no directions when our children came out of the womb. It is not uncommon for a child who has issues with accountability to also have issues with employment. In others words, it may be unrealistic to expect a child to come to work in the family business and suddenly succeed and have all of his bad habits simply disappear. Worse, the founders of the business who are also parents of the child have already developed a communication pattern that may be difficult to change. In other words, if little Johnny did not pick up his underwear off of his bedroom floor, there is a good chance he will not pick up his tools at work. A possible solution is to have siblings work somewhere else prior to joining the family business. Allow children a chance to fail and make sure they are responsible for their own behavior.
Number 3: Too many family members and not enough volume or income to support them.
If the family business did a great job of supporting your family during the growing years, but you are not independently wealthy, there is a good chance your family business is not going to support four families when you bring four siblings into the equation. It is just simple math. One solution to this dilemma is to leave the family business to the sibling or even two siblings that show the most promise.
Number 4: Promise of success and turning the business over to the kids with little or no follow through.
Many business owners dream of turning over the business to their children, but then they bring children into the business without actually letting go of the reins. For most owners, their business is their life and life after business can be frightening. Much of their day-to-day identity is tied up in the business. If the business fails or they are not part of it, a piece of them seems to die. Letting go or selling a family business is more like parting with a family heirloom than selling a public stock or piece of investment property.
Founders who bring children into the business must develop a timeline that outlines the transfer of power. Such timelines should include a delegation of duties, responsibilities that the emerging managers must learn, and a financial transfer of worth. My experience is that founders are reluctant to do this and it is really not about the money but more an issue of pride, self identity, and realization that the end of their life is nearing. Another important element of this transfer is for the owner to develop interests and hobbies outside of the business.
Number 5: Poor communication practices.
Different family members have different skills and personalities. It is not uncommon to find a situation where one family member is good at one set of skills and another at something totally different. For example, a wife may pay the bills while the husband performs the estimates and project management. At first glance, this seems like a good situation. Each person is using his or her strengths. The problem is that the husband may make operational decisions that heavily impact the financial health of the company. If he prices work too cheaply or buys equipment when there is no money to fund the purchase, funds are always short. A shortage of cash makes it hard to pay the bills and creates instant conflict. Only by clearly communicating can these two partners expect to succeed. They should make a budget and discuss job costing and other financial information.
Number 6: The company outgrows the position or the family member's life goals change.
Both businesses and people change. Such changes can impact overall business operations. For example, a spouse who works in the office while raising the children might do well when the company is at $200,000 in sales but will be a disaster when the company is at the $800,000 level. Or, consider an owner who reaches 55 and feels he has paid his dues and wants to take more time off and let his son or daughter run the business. This could be a disaster unless he is willing to train the son or daughter and also delegate the necessary authority to run the place.
One way to help manage these types of problems is to work on a company-wide planning process that requires clear communication of these goals and how you might overcome them. We find that many of our PROSULT™ networking participants avoid these problems because we require yearly goals to be written at the annual meeting.
In summary, there is no magic cure for family business issues. You can control your own destiny but you must be realistic about how family issues impact the business.