Family business hurdles

Grow past these 4 stumbling blocks for family businesses

As family businesses grow, they’ll need to overcome new hurdles surrounding management and succession planning.

Family businesses tend to start small, but over time they can leverage their unique advantages to become business and community powerhouses. Their advantages often include deeply personal commitment, long-term strategic focus, “patient” but careful capital, and a commitment to “pay it forward.” But they may also struggle with four challenges common to these entities:

Learning about healthy conflict

All businesses manage conflict but the stakes are higher for family businesses. Emotions may run hotter if, instead of debating a colleague, a family business member faces off with a son or mother, adding family “baggage.” But you can’t simply avoid conflict.

Families must learn that managing conflict in a healthy way builds a stronger family and business. By developing family policies such as a code of conduct, leaders can outline how decisions are made, how people work through differences, and how disagreements are handled.

Minimizing role confusion between family, management, and ownership

Those in a family business often wear many hats. In a CFO’s financial decisions, is he or she acting as a CFO, a daughter obeying (or rebelling against) her CEO father, or a business owner cutting expenses for a larger distribution? Also muddying the waters, family members may be unclear about the expectations and responsibilities tied to different types of compensation: salaries and benefits versus dividends, versus distributions.

Putting the differing roles, responsibilities, and compensation on the table to define them and help family members understand where the boundaries and rewards lie with each role is a powerful first step toward eliminating role confusion.

Evolving the management model

As family businesses grow, the leadership right for a lean start-up may not work for a stable, mid-sized company. The command-and-control management of a founder must give way to a more collaborative model with multiple family leaders and “professionalized” management.

Transitioning to the next generation may also introduce complications as sons and daughters who typically defer to parents may feel uncomfortable managing in a different way. Ultimately, the business’ needs must drive the management model, not family dynamics or tradition.

Planning for management and ownership succession

Like all organizations, family businesses face tough decisions planning for their future. But because these entities must identify and train both family and non-family members for leadership and potential ownership, succession is even more critical. Too many leaders discover the next generation wants nothing to do with the family business – and have no Plan B. It’s never too early to start those discussions and begin building bench strength.

In summary

If you want to learn more about moving past obstacles in your family business, contact Marjorie Engle using the information below.

Marjorie Engle

Senior Vice President
Organizational Development & Family Business Services

Marjorie Engle guides clients and their companies through executive coaching, transition and succession planning, organizational analysis, conflict management, and corporate strategy development. A specialist in assessing and developing family councils, advisory boards and boards of directors, she has extensive experience with family-owned, closely held, and public companies across many industries, as well as with not-for-profit organizations.

Engle serves as associate director of the Kansas Family Business Forum, hosted by Wichita State University’s Center for Entrepreneurship. She holds a certificate in Family Business Advising with Fellow Status from The Family Firm Institute, is a certified coach with Family Business Partners, and a certified Change Leader.

Every family business has its unique situation.
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