Two Rules for Mixing Family With Business

n my experience with family owned businesses, I have discovered that if owners would follow two simple rules, their lives would be both more prosperous and harmonious.

1. Treat your employees like family.

2. Treat your family like employees.

Rule #1 is applied by the best employers regardless of their type of ownership.  

Rule #2 applies to the unique challenge for family firms.  Breaking this rule can jeopardize your most valuable entities: your family and your business.

It is natural to want to share the spoils of business ownership with family.  However when family members are exempt from the same accountability and performance standards as other employees, who is really being served?

• Do the business owners benefit over the long term?

• Do the other key employees benefit?

• Do family members who are not held accountable really benefit in the long term?

The answer to the third question is not always readily apparent to the senior family management anxious to share prosperity with other family members. Often there is a desire to pamper their offspring in the workplace or shelter weaker siblings from the realities of the corporate world.  How can such good intentions go awry?

• Pampered second generation managers are not properly prepared to take the helm thereby derailing the retirement plans of the older generation.

• Succeeding generations develop a sense of entitlement that hinders performance and growth.

• Sheltered relatives are not developed to their full potential and fail to live fulfilling careers.

• Non-family, key employees exit out of frustration thereby disrupting operations and business growth.

• Low accountability leads to poor performance thereby damaging  business results.

• The resulting poor profit performance damages family relations (often irreparably) as finger pointing sets in and futures are jeopardized.

Treating your family like employees is a critical challenge for family firms. Failure to meet this challenge has damaged and even destroyed both businesses and families relations.  What measures has your family firm taken to avoid the inherent pitfalls?  Here are critical questions you should ask...

Has your organization established a common vision and sense of purpose to overcome through inherent generational and sibling differences?

Do all of your employees have specific,  measurable goals to establish accountability and performance? 

What is your management doing to assure the success of family and non-family employees in achieving their goals through ongoing development of management and leadership skills? 

While these issues apply to traditional organizations, family firms simply have more challenging dynamics.