Making Family Business Work
'You have to be vigilant when you run a family business,' says one Northeastern remodeler.
"You have to be vigilant when you run a family business," says one Northeastern remodeler. Although in business only six years, he has been successful. His entire family, with the exception of his wife, works for the remodeling company. His daughter runs the office, does the budgeting, some sales and bidding. His two sons and his son-in-law all work on the job sites.
"We have our share of personality clashes," he says. "I have to address things immediately before they grow into bigger problems".
According to John Ward, author of "Keeping the Family Business Healthy: How to Plan for Continuing Growth, Profitability and Family Leadership," there are several stages of family business development. The first, the entrepreneur stage, involves only the family and the business. The needs of the business come before the needs of the family at this stage. Sometimes family members tend to favor the business over relationships, causing resentment to build. In the second stage, the successor stage, the business requires outsiders, and issues of ownership and management diverge. The culture of the business shifts from entrepreneurial to professional management and issues of fairness become important with the growth of a second generation. In the third stage, the dynasty stage, there is increasing diversity of personal interests. The family, management and ownership issues continue to separate. In this stage, the family business players can lose sight of the original vision and purpose of the company.
Somewhere in between the first and second stages, the remodeler says that his family separates well. They leave the business at work when they spend time together.
At whatever stage, family businesses--like all businesses--must have clear goals. Joe Paul, a family business consultant in Portland, Ore., stresses the need for a clear vision in a successful family business. The structure of the business must also be sound. What type of leadership works best and is best matched with the family’s needs and values? Issues such as participation and compensation are also important. Who can join the business and how are they evaluated? Family harmony is also important. If the family can navigate through the storms the business without emotional injury or, for that matter, if the business can remain intact in the face of family trauma, the chances of emotional and financial success seem greater. How the family deals with conflict can perhaps dictate how well the family will function in and out of the business. Paul says he sees families and businesses within an ecosystem. "If the creativity [of the business] is tangled up in internal family issues, it can’t recreate itself to survive in the marketplace," he says.
Is there always a place for family members in the business? The remodeler we interviewed says no. "They have to have skills; we don’t want dead weight." Tough situations can develop when family members don’t pull their share of the weight or don’t perform well. "I had to fire one of my sons years ago," the remodeler says. "It was one of the most difficult things I have ever done. But it was completely necessary to preserve the business and the family harmony," he says. Eventually, he rehired his son after he had proven he could live up to what was expected of him.
Paul frequently works with families to determine how leadership roles should be transferred. How are successors picked and why? And how will they be groomed to take over the principal role in the business? The remodeler interviewed says he has begun planning for succession now, even though he will continue to run the business for another 12 to 15 years. "It has to be done before I leave. I want to be sure everyone has their niche," he says. He is grooming his daughter to take over his position. And his youngest son seems to be taking the role of lead carpenter, which has been a natural progression but can cause problems between the brothers.
"Right now I’m interested in growing the business so it will be big enough to support all three of my children after I retire," he says. Ideally, he says, he’d like to be able to move to Florida and get a check from the company on a regular basis. But for this remodeler, that’s many years off. In the meantime, he’ll continue to keep a close eye on the business and his family. "It’s not always rosy. But 99 percent of the time things go smoothly."
Keeping The Family Business Healthy
by John L. Ward