Sooner or later, every business owner asks himself, “Should I bring my family into the business?”
Whether it’s your spouse, siblings or kids, hiring family members is one of the biggest management challenges you face as a CEO. Bringing relatives on board has its advantages and downsides, but to make sure your company thrives and survives after you’ve retired, you must make sure you hire the right family members, and manage them properly.
The keys for a good family-run business is having a succession plan in place and creating a good governance structure, says Carmen Bianchi, owner of the consulting firm Family Business Associates and director of the EMC Business Forum at San Diego State University.
We spoke with Bianchi about family-owned businesses and how to rum them so they last through the generations.
ISBB: What are the pros and cons of a family-run business?
Carmen Bianchi: Being familiar with the company and its staff can be very beneficial. Having good backup and a built-in support system ensures you’re never going it alone. Also, families are usually willing to sacrifice more for the business. On the other hand, personal interactions and emotions might affect working relationships, which could lead to conflict. Just because someone is a member of the family doesn’ t mean he will be a good fit for the family business.
What should you consider when bringing in family members?
A succession plan is as important as having an estate plan, financial plan, and strategic plan. Every family-owned business should have an exit strategy. Are you willing to sell your company? If not, why? Is it because your company is your legacy, and your dream is to perpetuate it through the generations? But then, whose dream is it? If your successor does not have that fire in the belly, she won’t succeed or successfully steward the company through to the next generation.
Once you establish who the successors are, the next stage is leadership development, where successors acquire the needed leadership skills and experience, and are acknowledged by employees and clients. This will lead to a natural and seamless transition.
What can business owners do to promote their family members’ success?
One thing is a family council, a platform where family members can voice their opinions and be heard by those who work in the business. You’ll also need a code of ethics or family creed — a set of values by which a family business conducts its day-to-day business. Another structure is a family employment policy which outlines criteria for family members in the business. Along with that, you’ll need entry and exit criteria, which are the rules and regulations on how family members and exit the business.