How to manage a family owned business

Learn how to manage a family owned business and take it to the highest point of success. It’s always a pleasure to work in an arena where you are surrounded by your love ones. That is, people you care deeply for and who also care much for you. In such an environment, an open communication is assured thereby eliminating future issues which could be due to ineffective communication among the workers.

The family business is generally referred to as a theoretical ideal business. This is because it is well grounded with a loyal foundation made up of the family members. In other words, we can refer to a family business as a commercial venture in which family members are fully involved.

How to manage a family owned business well

A family business is usually made up of several possible combinations which could be husbands and wives, parents and children, extended families and multi generations. These individuals working together are called upon to strive for the same goals and objectives in order to assure the longevity of the business. They operate in the following posts; board members, advisers, employees, and stockholders.

It is without doubt that a certain level of intimacy among members of a family owned business gives them an advanced step when compared to other forms of businesses. This is often observed from the strong built-in support system of this business that ensures a greater level of solidarity and team work. And we all know that team work governs the rate of success in any business.

Advantages of a family owned business

Everyone will enjoy spending time in the presence of his/her loved ones since they feel free and more relaxed. Workers with relaxed minds are more productive. In addition, a family business assures a greater level of stability, loyalty, shared values and trust. And above all, a family business is more likely to make a success than other forms of businesses because the family members tend to be more willing to make extra sacrifices for their business to meet up with its goals. They do this because they see themselves as full partners of the business. That is, they feel directly concerned with any threat preventing the business from reaching its goals.

 Nevertheless, family owned businesses are not always as smooth in management as we might think. They often turn to be challenging but not impossible to manage. Therefore, we are writing to present the best family business strategy to overcome all the challenges that might come your way. In order to successfully manage a family owned business, a smart family business plan must be developed and followed.

Challenges of a family owned business

Challenges of family businesses often start arising from the fact that families tend to be more forgiving and lenient when it has to do with managing the businesses work-related decisions, working schedule, mistakes, and other judgements. In addition, more challenges of family businesses often arise from genealogical relationships, identity development and succession.

After looking at the generalities of family businesses, we’ll be addressing some of the unwanted habits in a family owned business and the best family business strategy needed for success.

Tips on How to manage a family owned business

Prioritize competence over lineage

Every entrepreneur knows that it’s not lineage that takes the business to a successful level. And same goes for maintaining the business at its successful level. A business is required to improve its performance with time. This calls for a high level of competency from each worker in the business. Thus, it’s not because Uncle Desemond feels that his son should be the financial manager in the business that he should be hired. Family business success is very far from sibling relationships. The question to be asked and analyzed by the other members is that of if the recommended person is qualified enough to take the business ahead in time. If after comparing him and an external person, the recent is found to be more competent, then he’s the right person for the position.

We ought to remember that family companies represent the hard work of so many people and that we are called to continue handling them with care. If you are a father and want that your son should take over from you, then it’ll be wise to prepare him through the right educational institutions. After he is through with his training, bring him to your side and teach him how things go about in the field. In this way, you won’t be sad while on retirement. Nevertheless, you ought not to force your child to take over a business he/she does not want to manage just because he is the eldest. You ought to look among your other children and pick out the one who is interested and competent enough to manage the position.

How to manage a family owned business: Prepare your successor while you are still alive

Death is a reality, yet few people talk about it not to even mention their preparation for it. This is a highly sensitive domain which if not properly addressed, your family business will move out of market immediately after your death. This is the main reason why several businesses never see the third generation. In order to prevent this, every family business structure should address the matter of succession when it’s still day. They can do this through meetings and discussions. The next business head should be proposed to the hearing of all in order to get their different points of views and they be address earlier.

You might be asking yourself ‘’why a head whereas all your children can have equal shares’’. It has never been a good idea to give equal shares in your business to all your children. This will often generate room for disagreements when it comes to taking delicate financial decisions needed for the business’s growth. Thus, it’ll be wise to choose one of your children who has proven his/her management abilities over the years to have a greater share in the business while you arrange other financial transactions to suit your other children.

Each business generation should adopt change with respect to time

As days go by, technology keeps advancing, thus innovation. So, you can’t keep on with the expired methods of production just because that was what your ancestors used in the 17^th century. It can’t work that way. You won’t be able to maintain and sustain the business in this modern era. Every family business should assign money for innovational research strategies in order to meet up with modern demands and standards. In this way, the business will keep on existing as of the wishes of its founders.

Implementing internal rules and their corresponding sanctions

There exists no successful institution on Earth without discipline. That is without a set of rules and regulations governing its existence. These rules and regulations go along with their corresponding sanctions in any case of failure. However, it’s very difficult for a family member to report or sanction another. But such habits will end up promoting laxity in the business and subsequently its downfall. Thus, a person with no familial links should be put in charge of discipline in the business. In this way, family members will take things seriously as they gain greater consciousness. Otherwise each will do as it pleases them while saying it’s a family business, my position is well secured.

How to manage a family owned business: Establish an external governing arm

An external governing arm in a business constituting of highly competent members will boost the success of the family owned business in a great way. In addition, it often helps much in addressing some of the challenges of family businesses. With an external governing arm in the business, competent external employees will be boosted to offer high quality services as they await promotion to some of these positions. But when there is no external governing arm and all the power centralized in the hands of the family members. This greatly discourages external employees from giving in their best as they realize that there’s nothing to gain by doing so.

A family owned business’s workplace should be differentiated from home

Mixing up things is often one of the challenges of family businesses. It’s very easy for two members to concentrate on a family issue at work for the whole day. Thus, every family business structure ought to fix limits between home and workplace. It’s a question of personal conviction and agreement from all members of the family. This issue should be properly addressed at one of your meetings. If every family member is conscious of this limit, they’ll concentrate all their efforts in making the business to go ahead. Work stress can also be developed when family members start mixing work life with home life. It’s recommended not to discuss business out of the office except in urgent situations.

Organize weekly meetings

In life, human beings are bound to have problems and differences of opinions. But they can sit and figure out things for the good of all. This is same for a family business structure. You don’t need to worry if differences of opinions arise or little issues among some family members. You just need to create time every week for meetings where all these differences are discussed alongside all disputes, and misunderstandings. If they are not addressed, the business will be at a risky side in turns of production due to ineffective communication.

How to manage a family owned business: Assign a clear task to everyone

Whenever everyone must do something, it’s very possible that at the end no one does anything. This then calls for the attention of every business head to clearly divide work depending on everyone’s domain of competency. In addition, work division will also prevent conflicts and misunderstandings.

The family business should be transparent, and everyone treated fairly

If we desire to have a peaceful working environment where everyone is putting in their best, we ought to keep all transactions transparent and treat all employees fairly. Favoritism kills the hardworking spirits of several employees thus; it should kindly be avoided. It is not a wise decision to set standards high for others and low for some. This will slow down the working zeal of many.

How to manage a family owned business: Learn from the past generations

Being the one in charge of running the new generation is not an easy task. It’s quite challenging but through hard work and the necessary skills, you’ll make it. It’s foolish to fall in the same holes that the previous generations felt into. Thus, as the present or future leader of the family business structure, you ought to study the best family business strategy which has ever been used to take the business to the highest height. In addition, you need to study each generation’s family business plan and see how they went about doing what they did or taking the actions that they took. After you must have studied each family business plan, figure out what went wrong and what went right. This is how you learn from the failures of others in order to keep yourself from falling in the same errors as they did.

The duty of a leader in a family business structure

As a leader, you are called upon to work harder than the others. Today’s leadership is far from sitting behind and folding your hands just to wait for everything to come in place. Today’s leaders often step out into the field and disclose their competences through good examples. In addition, as a leader you are responsible for preserving the family reputation, be it through your actions or through the quality of products or services being produced. As a leader, note that your actions inside and outside work greatly influence on the family reputation. Every leader ought to research and pick out the best family business strategy to implement.

How to manage a family owned business: Mutual respect and respect of the family hierarchy

Everyone should be given a chance to express himself else this might likely turn in to a source of dispute. And at the same, it should be noted that every family has a hierarchy which ought to be highly respected. Failing to do so will lead to greater problems. A happy family business structure is one which takes mutual respect seriously and gives importance to each and every member present in the business.

This brings us to the end of our article on how to manage a family owned business. We’ll conclude by saying that through a well-structured family business plan and strategy, a family owned business can be well managed and taken to several generations.