The succession stats for family-owned businesses are dismal! They represent 80 percent of the world’s economy, but very few survive more than a few generations. According to Harvard Business Review, only 30 percent survive into the second generation, 12 percent into the third, and just three percent into the fourth generation! Everyone reading this is either part of a family business or knows someone who is in one and can admit to the fact that family businesses are tricky, complex, and face unique challenges.
I’ve had the privilege of working with families and businesses for the last 20 years, and in recent years I’ve seen a shift as mom-and-pops increasingly recognize the need for training in emotional intelligence tools as they try to navigate issues surrounding boundaries, decision-making, and overall communication. I have found this work exciting, dynamic, and extremely productive, since emotional intelligence is 100 percent learned! So what do people involved in family businesses need to know to be successful? Here are six tips:
Interview and hire family
It is a common myth that family businesses should never hire their own family members. Indeed, many businesses today actually have policies in place that specifically discourage this practice. Like many things, however, these trends tend to go from one extreme to the next — neither of which is healthy! Despite the potential pitfalls, research tells us that family members are often some of the best leaders, and their presence builds what is called “family gravity” — they are more invested because it’s their business!
The key is making sure that who you hire is qualified and competent. Hiring someone who is unqualified just because he is family will predictably be a disaster. But if the family member is qualified, it’s very likely he could be one of the best future leaders for the business!
Talk money and expectations
One of the keys for a successful family business is remembering the boundary between family and business.
Yes, your employee may be a relative, but the pay and expectations need to be consistent with those of other non-familial workers within the business.
One big mistake I’ve witnessed is when kin are over-compensated and office rules are blurred for them (example: a 16-year-old daughter who gets paid $30 per hour for simple administration tasks and shows up late for work).
This creates many problems — other employees will really start to resent this unfairness, creating a poor work culture, and it’s not teaching the daughter the reality about how the real world works (yes, I’m sounding like my mother, but it really is true)!
Start from the ground up
When parents ask me how to make sure their kids are not entitled like many other young people they see, one of my most common answers is “Don’t make life too easy.” If we make life too easy, giving them what they want, preventing them from experiencing failure, paying for everything, cushioning them from disappointment, giving them “easy” jobs without them earning it, we are creating a recipe for entitlement!
Part of the reason that the first generation of any family business was successful is likely because they worked for it! Successful family business owners make sure their kids start from the ground up (sweeping floors, cleaning washrooms, assisting managers in whatever needs to get done). This builds resilience, character, and more of a realistic understanding not only of how the business works, but also how life works! Children will appreciate it more when they get a better role and they will be more respected by their fellow employees.
Start thinking ahead
Many business owners love the idea of passing on their company to their children and the next generation. Research tells us that 70 percent would like to see this happen — but only 30 percent will actually be successful!
Start talking openly with your kids and family about the business. Who would be interested to be involved in it? In what capacity? What role? Try not to take it personally if they are not interested.
This can be a difficult conversation, but it’s extremely important to discuss! It may be better for the sake of your family (and the business!) to hire non-family members as the future leaders. Or, if they are interested, start developing great family talent early and investing in them.
Dr. Karyn Gordon is one of North America’s leading relationship and parenting experts. She is a regular contributor to “Good Morning America,” founder of dk Leadership, best-selling author of “Dr. Karyn’s Guide To The Teen Years” (Harper Collins), and motivational speaker to a quarter of a million people. Visit her at www.dklea
