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Running a business can be challenging. Families can be challenging. But when they work right, family-run businesses can be incredibly successful—both personally and financially—says Michael Mazzarino, founding partner in The SCA Group, a business consultancy in Boca Raton, Fla. The key is to set rules to keep personal issues aside.
“It’s always a matter of separating personal relationships from business roles,” Mazzarino says. “Problems creep in when the group of people who sit around the Thanksgiving table are also the CEO, the bookkeeper and the sales manager.”
To navigate peril while running an enterprise with relatives, consider these guidelines:
1. Don’t assume good familial relationships automatically translate to good business relationships, says Peter Johnson, director of the Institute for Family Business at the University of the Pacific Eberhardt School of Business in Stockton, Calif. “People think you must take care of family first, but that isn’t the case,” Johnson says. “If you don’t take care of the business, the business can’t take care of the family.”
2. Clearly define each person’s role and get it in writing, along with a succession plan. “Treat these familial relationships just like you would any other business partner,” Johnson says.
3. Establish weekly meetings where personal affairs are set aside and everyone leaves with a concrete assignment. “There needs to be a strict agenda,” Mazzarino says. “This allows management to manage.”
4. When considering bringing a son or daughter into the business, do so gradually—introduce it informally when they are young, and then with established part-time jobs. “This gives the younger generation a true sense of the business, while the parent can gauge their skills and work ethic,” Johnson says.
5. Don’t be afraid to bring in consultants. Outside professionals can be useful to establish day-to-day policy and long-term succession plans, and to resolve conflict.
6. Avoid having anyone report directly to a member of his or her family. “Then there is less chance that orders, criticism and praise become personal,” Johnson says. “Otherwise, when a father tells his adult son to clean up the shop floor, all the son hears is, ‘Clean up your bedroom floor.’ ”
7. Many small businesses require incoming relatives to have advanced degrees or outside experience. Others specify a relative must have earned exemplary reviews or a number of promotions before he or she qualifies. “The family member feels confident they earned the position,” Johnson says. “And other employees will respect them more.”