9 Concerns of Family-Run Business
For most families, spending time together is enjoyable and fulfilling. So in theory, the idea of working with family to build a business is an attractive proposition.
There are examples across the country of successful family-owned and operated businesses – many of them household names. Large and well-known brands like Bombardier, McCain Foods, and Molson Coors are family businesses. In Canada, approximately 80% of all businesses in Canada are family-owned and they are responsible for about 60% of Canada's GDP per year.
Yet while the family business sector is clearly flourishing, there are significant challenges. If unaddressed, these can spell doom for the hard working family.
· Leadership, authority and/or control
A major source of conflict is around who is in charge. Often there is clear leader who is a natural fit, but then there may be long-held tensions between them and their siblings or family connections which boil under the surface. It is on the leader to be sensitive to this, while balancing the need to make decisions for the business. But sometimes these issues simply cannot be completely eradicated.
· Compensation and division of earnings
There may be tension over how much each family member makes and whether it is “fair”. This may be offset somewhat with use of performance incentives, but it may crop up from time to time.
· Management of change
As the management team monitors industry shifts or economic changes, they may need to make changes in how business operates or how departments are run. While this can cause challenges in any business, adding the family business dynamics to the mix can make it uniquely difficult to transition. This can be offset with a high level of communication with family members.
· Succession of business and legal transfer of property
Who is next? And who gets a piece of what is next? This can be a source of conflict and requires sensitivity in wading through each situation as it arises.
· Responsibilities
Is everyone pulling their weight? In a family business, family life events can overtake responsibilities. That is an advantage of a family business, but it can also create a challenge for getting actions accomplished. And it can create a challenge of perceived favoritism with non-family members.
· Decision-making
What is the process for making decisions? Who is the final decision maker in the event of an impasse. This is a huge area of conflict. It should be spelled out clearly what the process is and how conflict will be resolved.
· Employment of family members
The challenge of running a family business is that you may not have the right skills and abilities on the team. And you may be ‘required’ to hire one of your deadbeat cousins under family pressure.
· Personality differences and varying means of coping with stress
Because it is a family business and there is not the layer of professional distance that an employer-employee relationship typically has, there is often more emotion expressed over stressful situations. This can be either be accepted as ‘that’s just John’ or can cause more conflict.
· Future direction of business and long-term strategy
In family business meetings to discuss long-term plans, there can be widely diverse perspectives on the appropriate way to move forward. While you would expect that decisions can be made on the basis of business need and financial reality, the fact is that these things, if not managed, can run smack up against emotional needs and simmering family resentments.
When combined, the primary sources of conflict include individuality, professional differences, and organizational structure.
With multiple generations of the same family all relying on the continued success of the business to survive, the decisions and day-to-day operations that make up the heart of the company’s affairs comingle with personal matters. So it is critical to anticipate and address things as they arise.