After last week’s column (“The family business – functional or not?) I was surprised at the unusual number of emails I received from readers with stories of well functioning and badly functioning family businesses.
If I were to add those stories to the stories from my personal experience and the experiences of my clients, there are some significant commonalities among them.
In an imaginary, but typical scenario, Mom and Dad decide to take the plunge and buy an existing business or open a new business. Since a large percentage of marriages end in divorce, this can become a business problem. But let’s assume, for sake of this example, their married life is blissful.
In a few years, through hard work and determination, they get past break-even and achieve modest profitability. As business expands they invite family members (siblings/in-laws/children) to join the business.
This is a critical juncture. Without thinking this step through very carefully, they could be sowing seeds that will arise later and cause the business and perhaps the family to become dysfunctional.
The original owners and their family members all have expectations on what the future of the company will become and what their roles will become. Successful family businesses deal with those expectations at the front end, before people have changed their career paths, before they have become an integral part of the business.
Will there be a path to ownership or partial ownership for added family members? What criteria will be used to determine how and when this path will be created? What amount of investment will be expected and when will it be expected to be made?
What roles or positions will the family members be placed in and what criteria will be used to determine their path to promotion? What is the vision for the company and are the family members unified in their acceptance of that vision so that they are willing to work towards it. What criteria will be created for compensation? Will they treat their efforts as a “job” or as part of “ownership”?
More next week.
Please Wait…