Within family-run businesses, there is often some drama since the unique blend of relationship dynamics and business operations can present distinct challenges. Let’s explore six common family business problems and provide actionable solutions to get ahead of them.
Problem 1: Lack of Clear Roles and Responsibilities
“With a clear strategy, you can answer a lot of the questions family and employees might have for you in the business. You can tell them where the company is going. You can tell them why the company does the work it does. And importantly, you can begin to figure out where each person best fits. When you have a strategy in place, it’s far easier to see who has the right skills for each function in the business.” – Mike Mirau, The Family Business Manifesto
Overlapping roles and undefined responsibilities can lead to confusion, conflict, and inefficiencies within a family business. To address this issue, develop clear job descriptions for each family member and employee. Create a structured organizational chart outlining reporting relationships. Regularly review and update these documents as the business grows and evolves.
Problem 2: Poor Communication
“Whenever I survey a dysfunctional team, the number one problem is always poor communication. When I ask around,the most common response I hear from people is, ‘I don’t know what’s going on.’” – Mike Mirau, The Family Business Manifesto
Effective communication is the lifeblood for any business, but it’s particularly important in family-owned enterprises. Personal relationships can sometimes interfere with professional communication, leading to misunderstandings and resentment. To mitigate this risk, establish regular, structured meetings where everyone has an opportunity to share information and ideas. Encourage open and honest communication by creating a safe and supportive environment. Utilize formal communication channels, such as email or business messaging platforms, for important announcements and decisions.
Problem 3: Succession Planning
“There are plenty of examples of children inheriting a company only to run it into the ground. It happens every day in family business.” – Mike Mirau, The Family Business Manifesto
Succession planning is a vital aspect of ensuring the long-term success of a family business. Developing a clear plan for leadership transition can prevent family conflicts and ensure business continuity. Start planning early, involve professional advisors, and create a formal succession plan that outlines roles, responsibilities, and timelines. Communicate this plan to all stakeholders to minimize uncertainty and resistance.
Problem 4: Emotional Decision-Making, One of the Biggest Problems in Family Owned Businesses
“Every major company you’ve ever heard of makes their decisions work on paper before they make them work in the real world. Otherwise, you are just living in “Hopeville,” hoping everything works out somehow. Seldom does that happen.” – Mike Mirau, The Family Business Manifesto
Family ties can often cloud business judgment. To avoid emotional decision-making, implement frameworks that separate family and business issues. Establish a decision-making process based on data and facts, and consider involving non-family members or external advisors. By relying on objective information and analysis, you can make more informed and rational decisions.
Problem 5: Nepotism Problems with Family Owned Businesses
“If you don’t draw a line for family in the business, it can lead to all kinds of problems. I’ve seen businesses destroyed by favoritism from the founder, theft by siblings, children demanding more compensation than anyone else, and cousins who refuse to do any work at all.” – Mike Mirau, The Family Business Manifesto
Nepotism can damage employee morale, hinder productivity, and create unfairness within the organization. To prevent these issues, implement merit-based hiring and promotion policies. Establish clear criteria for roles and promotions, and consider hiring external candidates for key positions. By treating all employees fairly, you can foster a positive and productive work environment.
Problem 6: Financial Mismanagement
“Needless to say, your financials are some of the most important metrics we need to keep score and make sure your company is still winning.” – Mike Mirau, The Family Business Manifesto
Keeping personal and business finances separate is crucial for the financial health of a family business. Hire a professional accountant or financial advisor to manage your finances effectively. Regularly review financial statements and performance metrics to identify potential issues and make informed decisions.
Get Advice for Your Family Business Problems with Family CEOs
Addressing these common challenges can significantly improve the chances of long-term success for your family business. By implementing clear structures, fostering open communication, and making data-driven decisions, you can create a harmonious and thriving enterprise.
If you’re facing complex family business issues, consider joining Family CEOs. Our peer advisory group provides a supportive community of like-minded business owners and led by coaches who can offer guidance and share best practices.
Contact Family CEOs today to learn more about our peer group program.
