«When the business loses its name, it loses its soul.» Do you agree with this statement? The family is emotionally attached to their business. That’s why it’s so important to keep it, especially if the businesses have a family name. This essay is about the potential risks of family businesses and ways to overcome them.
Researches show that emotional bonding in the family and attachment to the company grows when children go into business after the founder and shrink rapidly when grandchildren (cousins) come to the company. A family is a system of many generations that are linked by blood ties and emotions, experiences. Right, families differ in their levels of emotional dependence. The family businesses have their own unique DNA, and it becomes a significant competitive advantage.
It is essential to understand that taking over a family business is not easy. Often, children are afraid of failing to live up to the expectations of their ancestral parents. That is why many experts recommend that they do not work for the benefit of the family, but a completely different company, for the first few years. This will allow you to gain a better understanding of the business, test yourself, and believe in your strength.
Problems of a family business
- Family conflicts.
The inability to separate business and personal life give rise to many misunderstandings. Sometimes, hostility is about defending the private interests of each family member. Sometimes the spirit of rivalry affects the business environment. But whatever the reason, you need to find a way to end the altercation, as feuds can jeopardize the overall goals of the business, increase employee turnover, and create a hostile atmosphere.
- Family patronage.
Working with relatives is a delicate matter. And it’s worth acknowledging that children do not always live up to the expectations of their successful parents. In family businesses, it is essential to keep a balance between family ties and the needs of the company. Just hiring someone based on family ties can be the start of a family affair. Also, it will eliminate the motivation to work for other non-family workers.
- The influence of emotions
It is clear that the topic of emotions cannot be overlooked when running a family business. After all, they have considerable influence on important decisions. Separating emotions from a business is not easy. But letting emotions drive your business can seriously affect your business decisions.
- Loss of non-family workers
Every employee of the company has a desire to advance his career. However, their chances are much lower than those of family members. After all, all management positions are usually occupied by family members who own the business. Often, ambitious and talented workers are unable to move on and look for a new place to work. The positive impact of non-family workers on the development of family businesses should be recognized. They are less emotional and add some balance to the functioning of the company.
- Business plan
According to a recent McKinsey survey, less than 30% of family businesses are surviving to third-generation owners. And of that 30 %, less than half live to the 4th generation. In the fourth generation, a stable income to the owner brings only 5% of what started.
For the long-term success of the family business, it is critical to formulating a succession plan. For the family businesses to remain profitable until the fourth generation, to carry the original traditions, values, and attraction, it is necessary to take care in advance of who will be the successors and whether the children of the founder will be.
Ways to solve problems
- Every employee should have their responsibilities and understand their role in the management of the company
- All issues must be solved quickly, throwing emotions aside
- Take care of an effective incentive system based on personal abilities and merit
- Make it possible for non-family workers to move
- Clearly identify the goals of the company and how to achieve them
- Prepare a business development plan for an atypical event