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Family Business Mistakes

Family-Owned Businesses

Family Business Mistakes

Want to ruin your family business in a hurry? Here are some common mistakes that can lead a family businesses from riches to rags.

Owning a business is hard work.

But when your business is a family business, the number of problems and pitfalls multiply exponentially. Just one misstep is enough to send your company careening into oblivion, so you had better know what the mistakes are before you make them.

Family Relationships vs. Working Relationships

One of the most common - and most deadly - mistakes in a family business is to assume that tight knit family relationships will translate into effective working relationships. Unfortunately it doesn't always happen that way. Kids who admire their parents outside of the workplace can suddenly start second-guessing their father's decisions when he is their boss, and siblings who are inseparable at home can quickly become caught up in interoffice jealousies and petty rivalries. To be fair, some family relationships do actually strengthen working relationships in family businesses, but you need to evaluate the situation on a case by case basis.

Full Family Employment

Another common mistake in family companies occurs when the owner feels it is his responsibility to employ every family member who wants a job. Full family employment is not a realistic goal for a business. Some family members are qualified to fill roles in the organization and some aren't. Rather than hiring people based solely on their DNA, hiring decisions should be based on the individual's education, experience, and competency to fulfill job requirements. If you have a hard time turning down family members, find a non-related individual in your company to take the lead in personnel decisions. You may even consider helping non-qualified families gain the qualifications they need to fill the position at some point in the future.

Lack of Professionalism

Family businesses are notorious for lacking professional decorum. Although your workplace may be teeming with relatives, it is still a workplace and it demands a certain amount of professionalism to run smoothly. Family politics and family discussions are not appropriate and can make non-family members feel uncomfortable. Along the same lines, interactions between family members should reflect business protocols rather than familial ones. Even though the business owner may also be the family patriarch, the way he interacts with family members at work should be similar to the way he interacts with other employees - not the way he interacts with his family at a summer barbecue.

No Succession Plan

Do you know who will take over the business when you retire? More importantly, does everyone else know? Family businesses experience high failure rates during periods of generational transition. Transition problems are exacerbated when the current owner fails to adequately prepare for the transition by neglecting to name a successor early and decisively. If squabbles and disagreements arise over the successor, at least an early succession plan buys time to resolve infighting before the transition actually occurs.

Input from Younger Generations

Family businesses involve the entire family, including members of younger generations. Since older generations usually occupy the top of the pecking order, the insights and suggestions of younger family members are often ignored. When generational transitions occur, the younger generation immediately implements their ideas, typically in broad, sweeping changes that are detrimental to the organization. A better approach is to involve younger generations in the decision-making process and implement their ideas gradually rather than all at once.