Owning and operating a business with family can have several advantages, especially related to trust and a joint commitment to the enterprise. Yet family businesses can also struggle if they do not pay close attention to management structures and communication, and how family members relate to one another as business partners and not just as family. As the Covid-19 pandemic puts additional pressures on small businesses and families, good systems and structures are essential for family businesses.
Roles and Responsibilities
Every business benefits from clearly defined roles and responsibilities for the people associated with the business. Yet this is especially important when the owners or the employees are family. With a family business, every issue affecting your business relationship can easily spill over into your personal life. You may think that you understand your role in the business and a family member’s role, but if it hasn’t been discussed and written down there are likely to be misunderstandings. You could step on each other toes, someone might feel unrecognized or under appreciated for their work, and it can cause confusion throughout the business for family and especially non-family employees.
To create clear understanding about roles and responsibilities, it is important to:
- Create job descriptions that outline each person’s role and specific responsibilities, and revisit them annually to keep them current.
- Set regular meetings (weekly/monthly/quarterly) to discuss tasks, responsibilities and how decisions are made and put into practice.
- Confirm that employees who are not part of the family are clear on how to navigate the family lines of authority and well informed on “how things work”.
When you have a personal and a business relationship with someone, how you communicate requires extra care and regular attention. It can be easy to be critical with a relative in ways that you never would be with a non-family member colleague. You probably know all the ways to push their buttons!
Marty Sanchez, who was a third-generation owner of Casa Sanchez knows this well. “With family, you sometimes speak without thinking first. Nagging is a common way of communicating in a family business.” She stresses that family businesses must remember that “the strength of the relationships is the strength of the business”. Being in business with family members means that you must attend to those relationships, communicate well and be able to compromise. “This goes for out-laws (in-laws), too,” she says, “who may not fully understand the family dynamics and have their own ideas for the business.”
Deborah Bowes has co-owned Feldenkrais Center for Movement & Awareness in San Francisco with her husband since 1996. Honesty is so important, she says. You need to be clear about “what you want to do and the kind of support you need” from your business and life partner. It is also important to share the load. “Be attentive to when your partner needs a break” and be sure to give extra support “when your partner is doing something that they don’t like to do or don’t want to do”.
This advice may seem straightforward but it can be hard to put into practice. It takes extra attention and care to commit to:
- Address issues as they surface in a respectful and honest way.
- Approach your interactions from a place of kindness, openness, and trust.
- Refrain from talking about personal issues during work time, especially when around people non-family members.
- Set up processes for how you will handle conflicts and follow these “rules”.
- When needed, bring in an outside mediator to help resolve the issues that you can’t fix alone. If helpful, use a business advisor to help build your management skills.
Fair Governing Structure
Everything may be working fine… until it is not. Just like any other business with more than one owner, it is very important to have agreements in writing. Written agreements can cover the governing and operating structures of the business as well as the specific roles and responsibilities of each owner, particularly related to decision-making.
There needs to be clear understanding about how compensation is handled for family members and how pay and raises are calculated. Imbalances in pay or a lack of clarity will lead to resentment. It is good to create compensation rules related to roles, tasks, hours worked, etc.
Family businesses should consider and answer these questions:
- How will family partners evaluate each other’s work?
- Will there be formal performance reviews?
- How will family partners or investors be compensated?
- Are there “open” books and shared financial statements?
- What happens to profits from the business and how are they divided?
- What happens when one partner no longer wants to own/run the business?
- Is there an exit plan process for how a family member leaves the business?
- Who gets the first right of refusal if there is a split?
- What is the policy for bringing other family members into the business?
Work/Life Balance for All
If you are in business with people you live with, it can be very hard to separate work time from family time. But it is important to have time with your family members when you are not talking about the business. Your business depends on your own self-care and the care you bring to your relationships. Any resentments at home can fester and impact the business. This is particularly important if your business partner is also your life partner. Deborah Bowes strongly advises that you “don’t talk about work right before going to bed” and recommends “going for walks to talk out difficult issues”.
Getting Effective Support
It is tempting to try and “go it alone” and take care of issues within the family instead of discussing your problems with outsiders. But there are times when you might need more help. Marty Sanchez of Casa Sanchez says that when an issue comes up with another family member, it can be hard to talk about it openly in a way that leads to resolution. “A family member may be unhappy but may not feel comfortable talking about it.” Sessions with a mediator have been really helpful for her family business “to discuss issues, find ways to compromise, and move forward”. Outside support – whether from a trusted business advisor or another family-owned business – can bring different perspectives and solutions. These advisors can help you address underlying issues that may be difficult to bring up or handle without support, and they can also help you implement and maintain good business systems.
Focus on the People!
Ultimately, for any business to thrive, it is important to not just attend to clients, customers, and the bottom line, but to the essential structures and scaffolding of the business itself – the people in the business. When you treat your family members and non-family member employees professionally, you create a business culture that reflects the values and vision of the business. Everyone will know what is expected of them, have access to tools to handle conflict, and feel respected. It is in this environment where people do their best work and the family benefits!
About the Author
Paul Terry is a Gellert Family Business Fellow. Annually, Fellows are selected by the Gellert Center because of their expertise working with family-owned firms and their recognized positions as leaders in family enterprise theory and practice over many years.
Paul Terry is principal of Paul Terry & Associates, providing management consulting and training to small business owners and emerging entrepreneurs. Paul and his team specialize in business management transitions related to partnerships, joint ventures and exit or succession plans, and they work with many family businesses. Paul is also an experienced teacher of entrepreneurship, and has designed, coordinated and taught business planning classes for many years. Prior to Paul Terry & Associates, Paul owned and managed a wholesale distribution company and two retail food businesses. Paul has been honored with many awards over the years including the Small Business Advocate Award from the San Francisco Small Business Network, the Outstanding Service Award from Renaissance Entrepreneurship Center, and Entrepreneurship Educator of the Year from Inc. Magazine, Ernst & Young, the Kauffman Foundation and Merrill Lynch.