The Correct Practices For Multi-Generational Family Businesses
There’s something very unique about walking into the store or an office of a family-run business. Somehow, after all is said and done, you walk out feeling like you’re a part of the family. There’s a level of comfort, relatability, and assurance that your needs are in the best hands possible. You almost forget that a business transaction went through at all. But behind the scenes, a multi-generational family business is at work.
If you are currently decades deep into a family-run business, or you are just starting out – this is for you. Enduring generations of success certainly comes with its costs, but the rewards can be even greater. Here are some great ways to deal with short and long-term challenges, so you can give your multi-generational family business a fighting chance.
Who does what?
Clear roles are essential to the success of a family-run business. The parties involved should outline their strengths and weaknesses. Members who take the lead and are more visionaries should consider the long-term growth of the business, implement strategy, and plan for economic uncertainty. Everyday operations should be delegated to members who are good with maintaining the business and riding the ebb and flow of traditional transactions. Family hiring policies should be considered when including new members. Always ask – is the involvement of this individual going to benefit the future and growth of the business?
Who gets what?
It’s clear that each family member may have different degrees of involvement. Before things get messy, a formal ownership structure should be put into place. A good way to determine what an appropriate compensation may be is by looking at competitors of similar industries. An assessment of involvement and compensation of a competitor should be in line with that of the family-run business. Outlining job descriptions and skills will help to highlight why a certain level of compensation is necessary.
Who said what?
Work conflict is nothing new. If conflicts happen in work environments without blood relations, it’s definitely bound to happen when you’re working with your family. This is especially true as more and more family members become involved. So, how do you separate your personal issues with your professional issues when the two are intertwined? In large part, conflicts arise when the inclusion of certain family members are weighing the business down. A lack of training, skills, and maturity could be major issue. Again, ask yourself if including someone into the mix will either help the business grow or inhibit it.
What are the numbers?
Moving responsibilities from generation to generation may or may not run smoothly, but you should plan for it regardless. 30 percent of family-run businesses move into the second generation of operations, 12 percent move into the third generation, and only 3 percent make it to the fourth generation. While the numbers may not show it, if each member maintains their accountability, has a clearly defined role, and uses their involvement to help the business thrive – every member is on the same page. Cohesion is everything.
Are you involved in a family-run business? Let the experts at Tobin & Collins help to ensure the continued success of your business. Contact us today for a consultation!