Family Business Challenges
There are a wide variety of family businesses, large and small, successful and less successful. Some family businesses have lasted for centuries. This is not the norm, though. The survival statistics for family businesses indicate that fewer than two-thirds of businesses run by families will last through three generations of leadership. In order for your company to be one of these, you will need to hurdle the challenges in your path. These include:
Nepotism – This is an issue that causes tension between family members and non-family employees. It’s very true that in many family businesses, the family members work harder than other employees. Plenty of other companies, however, hire on children, siblings, or cousins and allow them to do the minimum and still get paid or advance. It can also be challenging to get rid of family employees when they fail to do their jobs.
Left unaddressed, nepotism in a company can depress morale and loyalty. Employees will believe that family members will get better treatment and higher compensation for the same (or less) work. You do not want your employees to feel resentment or even contempt for the members of your family who work in your family business. The solution is for the company leaders to create policies that allow for fair compensation and a competitive atmosphere that rewards on merit. If you cannot get rid of a family member, it’s also possible to offer additional training or position them where they can do less harm to the company.
Compensation – Related to nepotism is compensation. If company leadership wants to encourage family members to work hard for their money and pull their weight, they will tie compensation to market value. Paying them for not working or for poor performance will destroy trust and morale and drive good workers away. You must make it clear to everyone that your company offers a level playing field for success. Salary and benefits should be set according to the job position and performance over time, and family employees should be evaluated according to the same standards as non-family workers.
Valuing Non-Family Employees
It’s easy to see how businesses that do not properly handle nepotism and compensation will become weaker over time. Family businesses must balance the needs of the family with the needs of the business, and the business relies on the talents and skills of all their workers. Non-family employees who do not feel properly treated or valued will either leave and take their talents elsewhere or stay and give less than their best. Either outcome is bad for the company.
Typically, non-family employees will leave for two main reasons: they don’t feel they can advance in the company according to their abilities and they don’t like the conflict between family members. These are both common problems in family led companies. Often family members will fill most or all of the leadership positions, and workers who are gifted have to be content with lesser roles. Family drama can also drive them away, especially if it gets bitter or interferes with the operation or profitability of the company.
If you own or manage a family business, you need to be aware of how you are treating your non-family employees relative to your family members. They add balance to the company because they are not as emotionally involved, and they bring skills that may be beyond the family’s wheelhouse. They also have insight on how the company really runs minus any rose-colored vision of the family. If you consult, include, and compensate them fairly, your business will be far stronger in the long run.
Does your family business have a problem with retaining non-family employees? Are you dealing with nepotism or compensation issues but do not know how to proceed? Call us at Prometis Partners. We help companies determine what is causing the issues they have and work with them to implement solutions that will make them more robust and profitable – a win-win for everyone in the company.