Running a family business differs in a variety of ways in comparison to running a normal business. While it is relatively easy to quit a business or a job and move to other things, it is incredibly difficult to quit on a family. Business experts identify the key issue and the reason why some family business thrive while others fail to the proper management of the family part in the family business.
A family, just like any other relationship requires constant communication, respect and unity to succeed and it is not any different in a family business. Beyond that several things must be avoided such as over promotion, overpayment and delayed retirement of family members. In the same way, family members cannot be under promoted or underpaid for the mere fact that they are family. There are many tips on running a family business but to really make a successful family business, here are five things you would need to consider.
Every family has a way they communicate. It is fundamental that communication in a family business is productive and respectful. The idea is to practice transparency, build trust, determine and agree on family and business values, and understand the members’ goals and aspirations within and outside the family business. Finding solutions to persistent problems is key and if more complicated than that, external consultation should be considered.
This part applies to both family businesses and other businesses as well. Evolution, however, becomes very important in family business when the family is multigenerational. A good example is when the older generation may fail to understand the purpose of new cultural and technological norms and in that way fail to match up to the competition in the market. To avoid the risk of alienation of customers and employees, a family must evolve and adapt.
- A Family Constitution.
Most governments globally provide the Memorandum of Understanding for businesses in their countries to manage how partners, employees and directors relate to each other. A family must, in the same way, develop their own constitution to include the family’s:-
- Mission statement
- Vision statements.
- Employment policy.
- A sample of pre-nuptial agreements.
- Strategies to develop the next-generation.
- Ownership policy.
- Family-bank and/or family venture capital funds.
- Dividends and benefits policy.
- Liquidity policy.
- Who can be elected to the board of directors or join the advisory board.
- Succession planning strategies.
- Rules about the family council.
- Information regarding the shareholder meetings.
- Recruitment Practices.
Businesses are always searching for gifted and skilled employees from all over and so should a family business. It should leave employee positions to non-family in order to carefully tap into the world of skills, technology and leadership. Family members can, therefore, focus on the upbringing and mentorship of the next generation.
A family business must possess the ability to look into the future and plan for it. It needs to have business succession plans long before the situation gets there. Ensuring the next generation stays empowered and motivated is a paramount task. Giving them the opportunity to discover, explore and experience their own decisions instead of a forced commitment to the business is vital. A good family business takes good care of the next generation from their most basic needs.
Indians have the most successful family business, here is why: 7 Lessons We Can Learn From How Indians Do Business.
Keywords: Family Business, Running a Family Business