Family AND Business: 5 Insights on The Road to Success
By Natalie Backora
Edited by Gini Collins
There are plenty of examples showing how a family business can be successful, including becoming a Fortune 500 company. Sam Walton opened Walmart in 1962 and it is still 50% controlled by the family. Ford is 115 years old, run by fourth and fifth generation contributors controlling 40% of the voting power. Estée Lauder was founded in 1946 and has five active family members with 23% voting power.
While these Fortune 500 company examples suggest that family and business can successfully co-mingle, mixing family and business does require additional work and insight. One study sites employee selection and management as top priorities for family business success. Specifically, Stoilkovska (2011) suggested assessing skills and abilities to determine what people (family and non-family) should be considered to work in the business and in what role. This is true for any business, but is an insight often overlooked when the emotional aspect of family relationships comes into the picture.
SOLVE consultants are not just I/O Psychologists dedicated to optimizing business and talent, but many also grew up and worked in a family business environment. Collectively, this group has over 20 years of experience with personal entrepreneurial ventures and family-owned businesses spanning nine industries, some of which include third and fourth generations. Here, we share some experiences and shed some light on insights and lessons learned throughout the years as products of the tricky, yet rewarding, world of family businesses.
Insight #1: Not every family member is a fit.
This is especially true when succession planning. Appointing family members solely because of a last name or bloodline could pose problems later. Failing to see family related problems or choosing to ignore them could lead to employee turnover, productivity problems and decreased revenue. It’s important to separate your business hat from your family hat, making sure to establish the boundary between the love of family and the success of the company. Remember that putting a family member into a role where they are not successful is not a gift, a favor or a helping hand …. just the opposite! Nor will it be a secret; everyone will know they are not the right fit! That’s not what you want for anyone, let alone a family member you love.
Insight #2: Expect the unexpected.
There needs to be a strategy for both planned and unplanned circumstances to ensure a smooth transition, should the time arise. What’s the vision for the company and who can help achieve it? A strategic plan helps companies identify their purpose, discover future opportunities and trends, anticipate problems and make better business decisions overall. You can only get so far without thinking ahead, especially in today’s fast-paced world.
Insight #3: Culture and customers should be top priorities.
Transitions in family businesses are primarily about the people, their motivations, their passions and their goals. Though a family business may have very well-established goals and operational protocol, change can be a good thing in keeping with the times and evolving with customers and culture instead of fighting against it. Helping to reveal and create alignment from generation to generation helps in the translation of a business over time so they can continue to play a relevant part in the fabric of a community.
Insight #4: Family matters but respect the hierarchy.
When people are really close as a family but haven’t established professional boundaries, it can be difficult to work together. Not everyone is the boss, nor should they be. It’s best to have clear, explicit roles for all involved so the business hierarchy can be followed. Also, receiving critical feedback from family can be more difficult than receiving it from non-family, so it’s important to establish professional norms and expectations that help the business succeed.
Insight #5: Don’t let emotions dictate direction.
Founders typically have a ton of passion for the business, which is a good thing! However, the emotional tie to the business can sometimes make it difficult to make objective business decisions. Rather, maintain awareness as to what’s happening and try not to let emotions dictate decisions, especially when family is involved. Consider hiring an executive coach with family business experience who can help listen and provide honest, thought-provoking and evidence-based feedback to help weigh decisions that impact family members in or out of the business.
Do any of these family business insights and “life lessons” strike a chord with you? Our strategists at SOLVE have been there and can help. Contact us to see how we can coach and guide you toward successfully managing your family business ventures. And this time, you don’t need mom’s permission.
Stoilkovska, A. (2011). The challenges of a family business. UTMS Journal of Economics, 2(2), 181-187.