family-owned business problems

Common family-owned business problems

You’re doing your best just to hang in there. When running a business, it’s easy to let things fall off the radar because you’re dealing with today’s family-owned business problems, and not thinking about tomorrow.

However, if you don’t take the time to establish clear roles, policies and procedures for your business and its employees, you’re building a house without a foundation.

The truth is many family businesses don’t survive into the next generation. If you want to give yours the competitive edge, it’s time to focus on your people plan. Here are some tips to help get your human resources house in order.

Have a mission, vision and values statement.

Start here. This will help lay the foundation of your business and nip potential family-owned business problems in the bud. Any decision about the future of the business should be matched to these tenets – and once formulated, everything makes sense through this prism.

A mission, vision and values statement will establish how and with whom you do business; how you treat each other; what your culture is; and what, at the end of the day, you will go to the mat to protect and promote.

When you skip this, employees won’t know the direction of the business and it can affect productivity. This lack of direction can lead to morale problems and lack of employee engagement. Don’t think that because your business is made up mostly of family members that they know its direction, goals and values.

You may have, at some point, created a mission statement, but is it a living document? You need to make it part of your business, tell your employees about it and expect that they know what you stand for.

Check your employee handbook.

What? You don’t have one? Or, if you do, it’s been on a shelf since you wrote it in 1985.

If you have a handbook, make sure it’s updated annually. If you don’t have one – get one. It gives your business structure and outlines processes that everyone is accountable for, whether it’s your brother or your newest non-family-member employee. It may also help curtail common family-owned business problems caused by unclear expectations or processes.

Your handbook policies may include:

  • Payroll and compensation
  • Time off and overtime
  • Industry regulations
  • Employee conduct
  • Communication and computer use
  • Performance appraisals
  • Hiring practices

Some family businesses take pride in not having structure. “This is how we do it, and we’ve never been sued,” they say. What they don’t know is that sentence should be, “We’ve never been sued, yet.”

There’s a difference between having structure and a casual company culture.

A casual atmosphere doesn’t give Uncle Joe permission to speak inappropriately to the new delivery driver. Just because Joe is family doesn’t mean he can’t get you and your business in trouble legally.

Remember, your business is not the family dinner table. Business is business, personal is personal. Each family member needs to know that. The way you talk to each other in a meeting should not resemble how you do at the dinner table. Don’t assume that you or family members will be forgiven for professional improprieties just because they’re family.

Employee policies and procedures are a necessity. One of the biggest challenges and priorities of a business owner is making sure you’re compliant with laws and regulations. A handbook can help reduce your risk of violating labor laws and running into common HR problems.

Hire the best person for the job.

Sure, it’s a family business. And, you couldn’t have done it without them in the beginning. As your business grows, however, take a look at who you’re hiring and why.

You should be able to justify hiring a family member or friend purely on qualifications. Ask yourself, “How is this person going to move my business forward?”

If the family member isn’t the best fit – choose the one who is.

Conduct performance reviews.

If you don’t have a system for evaluating performance, employees have no idea how they’re doing.

If they don’t know their place in the business and how their jobs relate to the bigger picture, there may be morale problems, productivity issues and potential for disengagement.

Performance reviews show where employees are succeeding, where they need more work and establish goals. Even family members should be evaluated. When family members are also graded on performance, it shows your non-family employees that all are held accountable for goals – no matter who they’re related to.

Make your records bulletproof.

Making sure your HR records are up-to-date, accessible and accurate will go a long way to help prevent legal and IRS problems, compliance issues and payroll glitches.

So often, family businesses are held together by duct tape – surviving for the week. As a result, compliance issues and records may not be the most important things on your mind.

Having a human resources system that takes care of payroll, IRS reporting and workers’ compensation issues can bring relief from stressful family-owned business problems.

Have a succession plan.

There’s an old saying, “The best time to plant a tree was 20 years ago.”

A succession plan will help ensure your tree continues to grow and thrive.

If you don’t have a succession plan, then you’re setting yourself up to be part of the group of family businesses that don’t survive into the next generation. It doesn’t have to be an intricate plan. Here are some things to consider:

1. What are your goals and objectives? Will you sell the business or pass it to a family member? Ask yourself, “What will this look like when all is said and done?”

2. If you intend it to go to a family member – does that person want to take it over? The next person in charge should share your passion.

3. How are disputes settled? Who has decision-making powers? Realize that this may change over time.

4. Identify roles and responsibilities for family and non-family members.

5. Create a timeline for when and what happens, and the ultimate completion date.

Go outside for help.

If the task lies outside your dream for the family business, get someone to help. You don’t have to establish your succession plan, write your mission, vision and values statement or deal with compliance issues alone.

When you’re spending the majority of your time on things unrelated to growing your business, you may need to go outside for help with duties such as human resources management and accounting.

Want to know more about how to build your business while avoiding common family-owned business problems? Read our complimentary e-book, The ups and downs of growing a business.

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2 responses to “Common family-owned business problems


family businesses that call each other mom/dad is that good or bad

Insperity Blog

Hi Darcel, Do you mean the company owners call their business a “Mom and Pop” company, or that people within the organization are referring to one another as “Mom” and “Dad”?

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