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Family Based Business Guides


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Family Based Business Guides

Defined simply, a family business is any business in which a majority of the ownership or control lies within a family, and in which two or more family members are directly involved. It is also a complex, dual system consisting of the family and the business; family members involved in the business are part of a task system (the business) and part of a family system. These two systems overlap. This is where conflict may occur because each system has its own rules, roles and requirements.

Conflicts often arise in a family business when roles assumed in the family system intrude on roles in the business system, when communication patterns used in one system are used in the other or when there are conflicts of interest between the two systems. For example, a conflict may arise between parent and child, between siblings or between a husband and wife when roles assumed in the business system carry over to the family system. The boss and employee roles a husband and wife might assume at work most likely will not be appropriate as at-home roles. Alternatively, a role assumed in the family may not work well in the business. For instance, offspring who are the peace makers at home may find themselves mediating management conflicts between family members whether or not they have the desire or qualifications to do so.

Family Business Management Strategies Video

A special case of role carryover may occur when an individual is continually cast in a particular role. This happens primarily to children. Everyone grows up with a label: the good one, the black sheep, the smart one. While a person may outgrow a label, the family often perceives that person as still carrying the attribute. This perception may affect the way that person operates in the business.

No small business is easy to manage, and this is especially true in a family business. It is subject to all the problems that beset small companies plus those that can, and often do, arise when relatives try to work together.

The family member who is charged with managing the family business company has to work at initiating and maintaining sound management practices. By describing what is to be done and under what circumstances such practices help prevent some of the confusion and conflicts that may be perpetuated by self centered family members. Such relatives sometimes regard the company as existing primarily to satisfy their desires.

The questions in this checklist are designed to help chief executive officers to review the management practices of their small family companies. The comments that follow each question are intended to stimulate thought rather than to include the many and various aspects suggested by the question.

Is executive time used on high priority tasks?

The time of the owner-manager is one of the most valuable assets of a small business. It should not be dribbled away in routine tasks that can be done as well, if not better, by other employees. Never lose sight of the fact that you as owner/manager, have to make the judgments that will determine the success of your business. You may want to run a check on how your time is used. You can do so by keeping a log for the next several weeks. On a calendar memorandum pad jot down what you do in half hour or hour blocks. Then review your notes against the questions: Was my time spent on management tasks such as reviewing last week's sales figures and noting areas for improvement? Or did I let it dribble away on routine tasks such as opening the mail and sorting bills of lading? You may want to ask your key personnel to run the same sort of check on their time.

Do you set goals and objectives?

Goals and objectives help a small company to keep headed toward profit. Goals and objectives should be specific and realistic. In addition they should be measurable, time phased, and written. List your goals and objectives by writing them out for your present successful operations. Objectives that are written out in straight-forward language provide a basis for actions by your key personnel. For example, state that you will sell certain number of units this year rather than saying you will increase sales.

Do you have written policies?

Flag this question and return to it later. Working through this checklist should suggest changes that may be needed if you have written policies. By the same token, your business will provide input for writing out policies if there are none in writing.

Is planning done to achieve these goals and objectives?

In a sense, planning is forecasting. An objective, for example, for next year might be to increase your net profit after taxes. To plan for it you need to forecast sales volume, production of finished goods inventory, raw materials requirements, and all the other elements connected with producing your forecasts, you will want to make provision for watching costs, including selling expenses. If there are key employees who can provide input into the planning, ask them to become involved in that process

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