Lake County Family-run Businesses Hope: Any company where two or more family members are involved and where the family has the majority of the ownership or control is said to be family-owned. The oldest type of corporate structure may be family-owned companies.
Farms were an early example of a family company where what we now consider to be private and professional lives were linked. In metropolitan areas, it was common for doctors or shopkeepers to live in the same building where they worked, and family members frequently assisted with the business as needed.
The academic study of family businesses as a distinctive and significant commerce category has grown since the early 1980s. Family-owned enterprises are now seen as substantial and dynamic players in the global economy. The U.S. Bureau of the Census estimates that family members own or control nearly 90% of American enterprises.
These companies, which range in size from two-person partnerships to Fortune 500 companies, are responsible for half of the nation’s employment and GNP. Compared to other commercial organizations, family enterprises may have some advantages due to their long-term outlook, dedication to quality (which is frequently connected with the family name), and concern for their employees. But because family and business issues sometimes overlap, family enterprises face a distinct management challenge.
FAMILY-OWNED BUSINESS CONCERNS
An interaction between two distinct but linked systems—the family and the business—with hazy boundaries and dissimilar regulations is known as a family business. Two intersecting circles can be used as a visual representation of this idea.
Various combinations of family members in different business roles, such as spouses and wives, parents and children, extended families, and several generations acting as stockholders, board members, working partners, consultants, and employees, may be present in family enterprises.
Because these jobs frequently overlap, conflicts can result. Typical family communication styles, for instance, might not be appropriate in professional settings. Similar to how personal issues or rivalries may spill over into the workplace, harming the company. A family firm must maintain open communication channels, employ strategic planning tools, and occasionally enlist the help of outside experts if it is to prosper.
Employees who are family versus non-family
Most family businesses run into some frequent problems from time to time. Because such workers may find it challenging to deal with family problems at work, limited prospects for growth, and the special treatment is frequently given to family members, it can be challenging to attract and keep non-family personnel.
Additionally, some family members could be hostile toward non-family employees on purpose because they dislike having outsiders work for the company. However, by presenting a balanced and unbiased perspective on business concerns, outsiders can act as stabilizing factors in a family organization. Exit interviews with departing non-family employees can help family business owners identify the reasons for turnover and devise a strategy to avoid it.
Many family businesses also struggle with establishing criteria and requirements for family members looking to join the company. To reduce the likelihood of conflicts, some businesses strive to restrict the participation of people with specific familial ties, including in-laws. Family businesses frequently experience pressure to hire family or close friends who might not have the talent or skills to provide value to the company.
Once employed, these individuals can be challenging to eliminate, even if they cost the business money or demotivate other staff members. A corporation can avoid such issues if the policy is strictly followed and only those with legitimate qualifications are hired to fill unfilled positions.
Analysts advise giving special training to develop valuable talent, enlisting the assistance of a non-family member in teaching and supervising, and assigning unique projects that limit unfavorable interactions with other employees if a company is compelled to hire a less-than-desirable employee.
Salary and Remuneration
Paying salaries to and distributing revenues among the family members who work for the company is another issue that family businesses commonly face. A small business needs to be able to devote a sizable portion of its income to growth expansion. However, some relatives—particularly those who own the business but are not employed by it—might not understand the importance of expenses that lower the number of profits they currently get.
Many family businesses have disputes over this, which makes it more challenging to make the investments the company needs to succeed in the future. Business executives should align compensation for each job description with industry standards to ensure that family and non-family personnel are paid equally. Fringe benefits or equity distributions can be employed when additional remuneration is required to recognize specific employees for their contributions to the business.
Choosing who will run and own the business once the current generation retires or passes away is another crucial concern with family enterprises. A clearly defined plan is essential to preventing disagreements on who will take over a business.
An ideal setting for starting conversations about family goals and plans, the timing of anticipated transitions, and the preparation of the current generation for stepping down and the future generation for taking over can be a family retreat or a meeting on neutral ground without interruptions or distractions. Older family members still active in the family business may favor sustaining the status quo when succession is delayed.
These people might be resistant to change and unwilling to take chances, even though these attitudes might stifle economic expansion. The company’s leaders should arrange for these relatives to sell some of their stock or convert it to preferred shares, get them involved in extracurricular activities, gradually remove them from the company’s day-to-day operations, and perhaps restructure the business to lessen their influence.
Family business owners can avoid falling victim to these typical problems by taking many measures. Many potential issues can be avoided by having an explicit declaration of goals, an organized plan to achieve the goals, a defined hierarchy for decision-making, an established program for succession, and strong lines of communication.
Everyone involved in the family company must know that their rights and obligations differ between work and home. Family commitments and objectives at home take precedence, whereas, at work, the company’s success comes first.
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The process of planning
Successful family businesses are built on a strategic planning foundation centered on corporate and familial objectives. Because families frequently have most of their assets invested in the industry, planning may be even more important for family businesses than other business enterprises.
Planning is necessary to align these goals and create a plan for achieving them because differences between family and professional aspirations sometimes cause friction. The best strategy will enable the organization to balance family and business needs.