Tuesday, June 15, 2010

How to Run a Family Business

Wether you are starting up your own small, medium or large business, it is quite common that family members are involved.  Working with family is a curse and a blessing, depending on how you approach it.  The thing I like about working with family is that there is no window dressing or political correctness when dealing with each other and if we have a passionate discussion, no matter what, we are able to move past it quickly.  The thing I despise about working in a family linked business is the proclivaty to get into heated, passionate discussions at inappropriate times, ie; customers and employees who would rather not see family dynamics in the workplace.  So we are constantly working on that issue and as time goes by, it gets easier to keep business as business and family as family.  So with all of that having been said, I thought this article from Inc.com could be a valuable assistance to the many small/medium/large family businesses out there.  Enjoy!
Regards~  Kris Halterman
(part of my business experience has been operating a family business with parents, siblings and a spouse for the past 20+ years)

Whether you're a third-generation CEO or starting a company with a sibling or spouse, running a family business presents particular challenges and rewards. Here's how to do it right.
By Christine Lagorio |  Mar 5, 2010
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You've heard the statistics: Fewer than 30 percent of family businesses survive to the second generation, and just 10 percent hold on through the third. Sound bleak? It's not. Those are far better survival odds than for small businesses not run by a team of family members.
A tight-knit managerial circle, and the flexibility of related – and deeply invested – employees, has been proven to make a business resilient. It also can confer a significant competitive advantage and impress customers, who appreciate knowing they're dealing with someone who cares deeply, and who has the same surname that's on the letterhead. But family management presents unique and intense challenges, including day-to-day emotional dynamics and big-picture issues such as succession planning.
Inc.com spoke with experts who have firsthand family business experience as well as coaches and consultants who specialize in the psychology and the logistics of running a family business. They shared their research, pointers, and life experience.
Dig Deeper: Resources for Running a Family Business
Running a Family Business: Planning is Everything
It's easy to say any start-up needs a business plan, mission statement, and revenue projections. In a family business, it's not that simple. Nor might those standard documents apply – or even be necessary at first, experts say. In their place, however, a family business must focus instead on drafting agreements, clear expectations, and assigning clean-cut roles to family members.
"What I recommend families to do is to get as many agreements done in advance as possible," says Fernando Lopez, a Toronto-based relationship systems coach who specializes in family business at Bridgespace Consulting. "What are they hoping to achieve? What do they not want it to become? They should have their high dreams and their low dreams, and from there they can see how they want to work together."
Taken together, the expectations set by individuals within a family can form a powerful vision for the future, which will guide a business forward. Ideally, formal documents will codify family members' expectations. At a bare minimum, they must be discussed at the outset in some depth, according to Cheryl Stein, president of Stein Consulting and Coaching in Chicago.
"The families that are really smart about it, that set up rules, are typically the families who do not fall apart and end up never talking to each other again," Stein says. "Setting up rules when you are getting along can save years of heartache - even if you just set up a rough framework."
And she knows from experience. Stein served as a vice president of her family’s multi-generation real estate company, working alongside her siblings, parents and grandparents to sustain their 80-year-old company. But a lack of clear expectations – and unerasable family dynamics – caused her to leave the business.
"While my father was alive, he always treated me like his little girl," Stein says. "I really couldn't work hard in that situation because my brain wasn't in it. So I went back to school."
Stein went on to study the traits of successful and unsuccessful family businesses. What's most important, she says, is taking time to design and discuss a system for long-term planning. It should be done at formal meetings, not piecemeal or around the dinner table.
"Making room for strategic planning is the most essential piece," she says. "Ask everyone: Where do we want to be in five years, as a family? As a business? And as an individual? The answers to those questions will change the whole landscape, because then when opportunities come up, you know they are opportunities."
When drafting a business plan – or even just laying the groundwork by brainstorming collective dreams for your company's future – its important to reflect on what makes you and your family unique, advises Kathy Marshack, a Vancouver and Portland-based psychologist and family business coach who is the author of Entrepreneurial Couples: Making it Work at Work and at Home.
"It's about knowing who you are and what your family style is, and designing your family firm around that," says Marshak. "Maybe you're all super go-getters and want to take your business online and international – good, go for it. Or, if you're content running the business out of your house, and you don't care much about earning millions, that's great – just make sure you're all on the same page."
If you're working only with one partner, and you are in a relationship, whether casual or spousal, it is advisable to document your business relationship in a formal business-partnership agreement. The document should, at a minimum, include duration of the agreement, partners' capital contribution expectations, and divisions of profits and losses. You can also include salaries, job expectations and terms upon which the partnership may be dissolved. If this sounds like a business prenuptual agreement, that's exactly what it should be, says Marchack. But the agreement shouldn't reflect or foment hard feelings: It's designed to protect both partners in the business.
"When you love somebody, when you trust a sweetheart or a spouse, you think you don't need a business partnership agreement – you're afraid the other person will think they're not loved," she says. "But I've seen a lot more heartache come from not having a legal agreement laid out beforehand as to who owns what should partners need to part."
Dig Deeper: Why Some Family Businesses Thrive Generation after Generation
Running a Family Business: Defining the Relationships

Part of setting clear expectations is also in the present. Making sure every employee – er, sibling or child – is content requires not only outlining, but also maintaining every individual's responsibilities in the business. That can be accomplished through implementing some simple human resource tools, such as classic job descriptions. But if you're just starting out, you can let the process begin organically due to the unique and sometimes sensitive nature of family relationships, experts say. After all, everyone involved has a big stake in how the business succeeds.
Stein suggests as a starter, plan family business meetings. Don't rely on discussions around the dinner table to run a business. "What typically happens is you're running the business and you're mired in the business, so you rarely sit down to make a point of discussing what's going on," she says.
Another rule to determine – either collectively as a business or as a CEO making policy – is who, in the present and future, is part of the family business. Decide what qualifications are necessary.
"Do you want them to have outside experience? Do they need to have education? Does everyone in the family get a job here? Or are there boundaries?" she says.
Making an employment policy includes deciding on compensation standards as well as expectations for employees. And before you think about the future, set guidelines for the present.
"One idea that I've often asked people to do is for them all to talk about what they feel they bring to the table, and what they feel the rest of their family members bring to the table," Lopez says. "It helps to decide what roles its best for each member to take on."
If you're a small business without many formal HR policies, it can still help to give everyone a job title, description, and performance standards. Rewards are key – whether it be a certain title that a family member desires (and lives up to) or a certain salary they need.
Marshack says men at the reins of a family business need to especially be aware of the significance of their children, mother or wife's contribution to the business. "People have in their mind a certain amount they believe they are worth. It doesn't matter what that number is, but if you're not paid a certain amount, you have grumpy people," she says. "Even in this day and age, I see businesses where the women are not paid, or are not paid as much, because they are just seen as helping out." There's a difference between casual advice or a friendly coffee run and full-time receptionist duties. If a partner, spouse or child is providing more than occasional task work, they should be fully compensated for their time.
In his book, The Survival Guide for Business Families, Gerald Le Van stresses the importance of fair compensation. Reasonable benefits should come "along with an understanding of money, it's meaning, its potential, its limits, what is involved in making, spending and saving money…" There is a relationship between money and self-esteem, he notes, and as the manager of a family business, that's something you need to be cognizant of nurturing.
Dig Deeper: When an Entrepreneurial Streak Runs in the Family
Running a Family Business: A Focus on Healthy, Productive Communication

It's one thing to say you'll try to communicate better with family members, but it's another thing to actually do it. Experts say this is one of the most difficult parts of running a family business.
If you're willing to set up strict guidelines from the start, the ideal situation is to draw a clear line between family and business discussions. Just as you shouldn't discuss Cousin Terry's wedding shower plans at work, you should not let business intrude upon a family dinner. Doing so would not be fair to work productivity – and it's not conducive to a happy home life either.  To continue reading this article click here.

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