FAMILY BUSINESS MATTERS (Part 2)

In our last publication, we posed several complex questions concerning the family business.  Many of these questions have a wide range of answers, while others are more clear-cut.  With the benefit of many years’ experience in family businesses, we will address more of these issues in this edition.

·        Should the Management Team be limited to Family only, or should Outsiders be brought in?

The answer to this question depends on the level of business expertise that exists within the family.

On the one hand, if members of the family are qualified, either through education, experience or both, then they should be part of the management team.  However, if the only qualification he or she has is being a member of the family, along with the desire to be part of the family’s business, then a position that provides dignity and pride, but limited decision-making responsibility should be offered.  This position should go to their core competencies, such as administrative or customer service tasks.

On the other hand, if an honest appraisal indicates that no one on the family meets the leadership requirements, then an experienced outsider should be given serious consideration to joining the management team.  The bottom line is that a family business is still primarily a business, and should be run as one.  This requires competent leadership more than bloodlines.

·        How should business responsibilities be shared?

Again, qualifications for the roles in a family business are of primary importance.  Giving family members positions of responsibility that go to their core competencies will make everybody’s life easier, and provide job satisfaction for each relative. 

One with great attention to detail could be in charge of inventory.  One who writes and speaks well could handle correspondence and telephones.  One with a talent for visual style could design the office or shop space, or uniforms.  A “people person” would do well in sales or customer service.

Allowing people to work in areas that play to their strengths and interests, typically, will create an environment of productivity and teamwork.  Your customers will be best served this way, and therefore your business will be best served, as well.

·        Should compensation be directly related to responsibility/abilities, or is everybody treated equally?

Compensation can create more friction than any other issue in a family business.  However, if the job descriptions are articulated properly and an organization chart is put together, then this issue can be less of a problem.  There is a wealth of available data on salary ranges for various positions in a variety of industries, across different geographic regions.  Year-end distributions and bonuses for job performance can also be used to address compensation issues, as well.

Bottom line, smart businesses pay based upon responsibility of position, and performance.  Bloodlines should not alter that philosophy.

·        What is the relationship of spouses in a family business?

Experiences with spouses in family business have been all over the map.  In some instances, spouses exert a very positive influence on a business.  For instance, with one of our clients, a spouse was very creative and made significant contributions to the companies marketing effort, contributions that were well beyond anyone’s expectations. 

However, in another business, the exact opposite occurred and made for a very disruptive environment in the work place.  This had to be resolved with some unfortunate results.

Like with family members themselves, business sense should dictate the positions of spouses.  If they have the skills, experience, and work ethic to make a solid contribution, then they should be rewarded with responsible positions.  If their only claim to employment is their marriage to a family member, then their positions should be dictated by the level of positive impact they can make to the business.

In closing, family business issues are never simple, and must be dealt with a great deal of consideration for the personality and feelings of each individual member.  While Business Sense should determine all business decisions, there is more at stake with these decisions when it involves a family dynamic.  Relationships of parents to children, siblings to one another, core family to cousins, aunts, and uncles, and family members to spouses all play a major role  - not just in the success of the business, but in the quality of family life.  But when wise and careful decisions are made and communicated properly, wonderful results can emerge.

<< Back to Part I

Jeffrey P. Ross

© 2004 RossFialkow Capital Partners, LLC

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