How to effectively manage your family business?

America is the biggest economy in the world and you will be surprised to know that the biggest part of America’s wealth is from family owned businesses only! Nearly 80-90 % of all business firms in North America are actually family enterprises. About 50 percent of the gross domestic product of US comes from family businesses; nearly 60 percent of the country’s employment and 78 percent of all new job creation comes from family owned businesses in US.

How to effectively manage your family business?

Recent surveys have shown that family businesses have longevity and continue for generations to come. The mean age of the family control businesses is 60.2 years and more than 35 percent survive to the next generations. The driving factor is sense of connection and the sense of identity which owners and other members perceive with the business. There is a long term perspective and the firm has high values which affect the resource inventory positively. However the day to day work of a family business owner can be compromised and affected by different factors such as relatives and through an effective management all the issues coming on the way can be solved positively. The challenges are big and lots of things like emotions etc. can cause interference to rational business decisions.  If you run a family business then here are some useful tips for you to effectively manage the challenges you face in your business and excel at all steps.

Business comes first

Always work on the rule that in business, business comes first and the success of the business is very important whatever may be the politics or ties in the family. The business relationship should be accepted and understood by all the family members. The boss and employee relationship must be followed with full sincerity. The issues and problems of the work or home should never overlap or conflict with one another. For making this point effective you should do the following things:

  • A clear business plan, mission and strategy must be developed and communicated to each and every member of the family.
  • The structure and chain of command of the business should be well communicated to all. Line of authority for decision making should be clear and communicated to all.
  • Avoid confusion and blame making by communicating everything with each and every family member.

For stronger management hire a non family member

To make decisions and stick to them firmly, consider hiring a non family member for a position of authority. By doing this you will be free to make effective strategies, plans and developments and the non family member will incorporate it well in the day to day operations. By doing this you may be a bit thick skinned but the strategy will really work for smother operation of the business.

Resolve all family discords and conflicts

Dealing with discord or conflict among the family members in a business scenario is really difficult. But it can be handled well by remaining objective about the situation. Do not take side of any particular member of the family but on the same time tell everyone that you will not let disagreements hamper the business and its objectives. If you find that you are not able to solve the disagreements among the family members then consider moving the disagreed member to new line in the work or to other branches of the work.

The conflicts in the family businesses are easily resolved when there is a proper planning in advance for dealing with the future problems that may arise. A good thing is to develop the business plan which recognizes the impact that relationships can have on the business operation. The plan should discuss that how the business operation and family relationships can be managed. The plan may have a detailed procedure for resolving the disputes between the family members. The use of an outside advisory board with non family members nominated by shareholders can solve the disputes in a better way. There are qualified family counselors and family business mediators too who perform the job of resolving discord and conflicts in the family owned businesses.

Give importance to family relationships too

It is really important to understand the importance of relationships too. Everyone wants to be a successful businessman and earn a lot of money but giving importance to family relationship is also important and needful. It is really heartbreaking when we hear that families ripped apart due to business disputes. One thing should always be there in mind- “You can build a business again but not the relations”. You have got only one family for life, so give importance to it.

Give importance to family relationships too

There should be family fun time too!

All business and no fun time should be avoided. You may have fun during the business with the family but you should really set aside a “family only” time. Talking about the business all the time will make your relationships suffer as well as other members may feel frustrated. Spend time away from the business with your family. Enjoy with the feeling that you are not business partners. Go out for lunch and do everything which makes fun. This will not only give you and your family relaxation but will also help in strengthening the bonds within the family. Ultimately your working relationships will improve.

Do not create two classes within the family

This is one very important rule in a family owned business. Never try to create 2 classes of employees which are family and non family. Never give special treatment to your family members and be impartial towards all the employees. Giving special favors to family members in a company sets a bad example to everyone and can be a cause of de-motivation to the non family members. This feeling should never come in the mind of non family members in your company that promotion or salary increment is out of their reach because they are not family members.

Family business gives you a sense of pride, loyalty, fellowship and continuity apart from a financial stability for everyone in the family. The legacy continues for generations and provides a sense of uniqueness and recognition for every member of the family. With proper planning and management you can always avoid the pitfalls and effectively manage your family business. By using the strength of the knowledge passed down the generations to you and blending it with your management skills you can surely reach the new levels of success in your family business.


Contributed by Ashish Singh Parihar ( Class of 2008, IBS PUNE )