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In business, interpersonal conflicts are inevitable. While running a family business, working with family members while taking care of business-operation and ownership responsibilities can make conflicts feel even more personal.
When the boss is your spouse or the underperformer is your sibling, child or other relative, separating the demands of the business from the dynamics of the family can be particularly challenging. Old grudges may spill over into the business, and company issues may strain family relationships.
By providing a clear structure and with some extra planning, you can develop a family business that's productive and harmonious. Here are some family business tips to help you work well with relatives.
Informal operations can cause problems
A common problem when working with family members is the tendency for roles and responsibilities to evolve informally, such as with handshake agreements that aren’t written down. This can lead to ambiguity, confusion and tension between family members and throughout the business, even among non-family employees.
Another challenge is underestimating the contributions of family members. For example, an owner may think their spouse or children are “just helping out” by handling the accounting or managing the warehouse. Consequently, these people may not be paid as much as other employees, or may not be paid at all, despite being integral to the success of the business.
Structure reduces tension
Many of the challenges of working with your spouse, children, parents or other family members can be resolved by managing the business more professionally. That means developing formal, written agreements, along with reports and job descriptions.
Increasing professionalism is a growing trend among family businesses, but it's also a continuing challenge, according to 40% of the family businesses surveyed by consulting firm PwC. The benefit of formalizing policies, procedures and job descriptions into written documents, however, is a well-defined reporting structure that facilitates discipline to help the business operate more smoothly, grow faster and foster innovation.
Create job descriptions
One of the most important steps in fostering a more professional environment while running a family business is to create formal position descriptions. These descriptions should list the minimum qualifications for the job and outline the position’s responsibilities.
You can start this process by asking each employee to write his or her own job description. Ask them to list their overall responsibilities and their day-to-day activities. Talk with them about what they think their jobs should entail and what educational requirements and background are needed to perform that job effectively. Also, consider whether experience in other companies or industries would be helpful.
This can be a good time to plan for staff development by asking individuals what they want from their careers and for the company. They can work with supervisors to jointly develop plans to achieve those goals.
Take what you’ve learned and write a clear, detailed job description based on the realities of the position. Before finalizing the descriptions, it’s a good idea to review them with experts outside the family, such as a board of directors or business consultant, to ensure your descriptions reflect industry standards and expectations.
While you’re focused on personnel, take time to establish measurable performance standards and strong reporting mechanisms. This might mean, for example, setting quotas for sales, customers served or manufacturing efficiency, and requiring regular reports.
Ensure the agreement between partners is formalized, too, even if the partner is your spouse or significant other. Work with your business lawyer and advisor to determine what fits your needs, but partnership contracts often set out the details around how the partners will interact, such as each partner’s capital contributions, how profits and losses are divided, salaries and job responsibilities. It’s also important to consider -- and discuss how the partnership may end someday.
Plan the business succession
Many companies say they have a succession plan, but only 23% of family businesses noted in a PwC survey said that they actually have a detailed, documented succession plan. Putting the succession plan in writing ensures the company has a well-considered way forward to identify new leaders in the company who can replace a retiring employee or one who's leaving. Sharing that plan among the family may create conflicts, but that also allows time for those conflicts to be resolved.
Formal documentation for expectations, responsibilities and succession goes a long way toward eliminating the conflicts and confusion. This helps family businesses thrive for the next generation.
No matter who's running the company, it should be protected against the unexpected. Contact Nationwide for more information on small business insurance that can provide financial strength and stability when you need it most.