Family Business Mistake #1

In my last blog I talked about one of the core issues underlying most internal challenges faced by family-owned businesses – the tendency to run the family BUSINESS as a FAMILY business. In order to succeed, some of the family dynamics need to be set aside during work hours so the business can be run by solid business decisions.

In the next few blogs, I’ll talk about the specific mistakes that have the potential to derail your success and make your work experience more frustrating and less satisfying.

Mistake #1:  Absence of clearly defined rules, roles and responsibilities

When most family businesses begin it is not uncommon for the employees to wear multiple hats – that’s okay and even necessary.  However, the moment a business adds a second employee, even if part-time, you want to put in writing the role and responsibilities that individual has.  From this list of responsibilities, job descriptions can be created. Just because the employees are related doesn’t mean you can all assume who’s doing what.

The lack of clear roles and responsibilities often results in important work being delayed or not done at all and leads to confusion, conflict and power struggles (internally and externally). Without formal roles and clearly defined responsibilities, it’s difficult to hold employees accountable for goals and performance.

One of the unique problems a family business without clear roles experiences is that employees tend to revert into their childhood roles. Big brother ruled the roost at home, but now he has to answer to his little sister. Dad takes the lead at home, but he works for Mom in the family business.  Without clearly defined and agreed upon roles this can lead to disaster.

Every family and individual is unique, but some common roles emerge in our analysis of family dynamics.  Here’s how it often happens:

Family Hero – Often the oldest child – Makes good grades – Tend to be leaders; Serious; “Has it all together”, Adult-like, Helpful at home and successful away from home – Tends to feel inadequate and never good enough; May feel scared, guilty and lonely.

Scapegoat – May be the second child – Does not do well in school – Rebellious; Angry; “A screw-up”; Competes with the hero, but loses out; Stops pleasing and instead withdraws; higher risk of engaging in substance abuse; Hangs out with like-minded people – Feels left out in family; Feels like a misfit; Wants attention, but can’t ask for it – Often experiences hurt, guilt and loneliness.

Lost Child – May be the third child – Quiet, shy and often goes unnoticed – Loner; Ill-at-ease socially; May read, listen to music or watch a lot of TV: Tries to not be a bother; Strong attachment to animals; Not a lot of close friends – Feels different; Feels like an outsider; Low self-esteem; Feels forgotten.

Mascot – May be youngest child – Class “cut-up” or clown – Happy-go-lucky; Disruptive; Hyper-energetic; Family regards as fragile – in need of protection; Keeps focus on self – Feels fearful and anxious; Confused and in the dark.

These are the roles in relatively healthy families – dysfunctional families have additional roles. The point I want to make is that the roles each family member lives out in the family may not be what is best for the family business.

So, if your business is made up of such a variety of roles, how do you make it work? Research has shown that collaboration improves when the businessroles of individual team members are clearly defined and well understood so they are allowed to do a significant portion of their work independently. Without such clarity, team members are likely to waste energy negotiating roles or protecting turf, rather than focusing on the task.

As a family business, rules are separate from the company’s policies and procedures.  Establishing rules early on will help to clarify many important issues. Even if the business is small, anticipate in advance what issues may come up and establish rules governing each. They can always be modified as needs arise.

For example, who is eligible to join the business? What are the qualifications for ownership or buy-sell agreements, etc.? Will we hire in-laws? If so, what happens in the event of a death or divorce? How do grandchildren fit in? I heard of one situation where the family business chose to retain the son-in-law instead of their daughter after the divorce, which was a difficult situation for the family to navigate for many years.

Commit to putting all rules, roles and responsibilities in writing and agree to hire or position family members based on qualifications, strengths and passions and compensate them according to position and performance – and I recommend researching industry standards for the various positions. Paying inflated wages can cause serious adjustment problems for employees who leave the business and can’t align their lifestyle with their earning capacity.

If you are starting out establishing your family-owned business, you will do yourself and everyone else a favor by thinking like a CEO and laying out the business before trying to squeeze family members into positions that may not suit them or your business goals. Even if you have been in business for awhile – and especially if you’re experiencing some of the backlash of letting the FAMILY overtake the BUSINESS – I would encourage you to make it a priority to schedule brainstorming and policy-setting sessions with your leadership members. Working together, you can create a business that thrives without damaging your family relationships.

Live, work and relate well!

Dr. Todd