10 Rules for Running a Family Business without Conflict

10 Rules for Running a Family Business without Conflict

by Jennifer Xue

Whenever you go home for the holidays, a family conflict would usually follow. Now, how can running a family business, which requires you to meet family members every single day be conflict-free? While conflicts can’t be completely eliminated, unnecessary frictions —albeit small ones— do hamper growth and progress.

According to a non-profit organization Family Firm Institute based in Los Angeles, family businesses comprise 80 percent of all business enterprises in USA, which contribute to 60 percent of the country’s employment. The US economy depends on family businesses to thrive and be prosperous.

The thing is, fewer than 30 percent of family businesses can survive to the second generation. Even fewer than 10 percent can survive to the third. Even though it sounds not so rosy, even fewer businesses managed by non-family members can survive that long. Still, family businesses have a higher survival rate.

If you can manage conflicts, a family business may survive through generations.

Thus, ideally, in a family business, conflict potentials are minimized, because once a conflict is full-blown, it’s harder to resolve than conflicts that occur in non-family businesses. Family members usually have several layers of interests, such as family interests, business interests, ownership interests, and inheritance —which can be a combination of those earlier three.

Since you can’t fire a family member, you can only manage things with precautions, rules, and boundaries. Here they are ten of them.

First, “we’ll always be a family” mindset, but there is a clear boundary between “family” issues and “business” issues.
Maintain a strong bond. Always remember this whenever a conflict arises. Doing business together is a way to increase that bond. Thus, it’s important to handle every problem professionally and don’t take things to heart.

Second, the right person for the right job.
Be fair and truthful. Place the right person in the right job. Don’t use your ego. Everyone must be doing something they truly enjoy and skillful to perform. Also, don’t abuse a family member. Just because Aunt Bessy is good in cooking, she shouldn’t be the only one cooking in the family restaurant’s kitchen.

Third, plan everything in advance.
Write things down, be as specific as possible. Draft agreements as early as possible and revise them when the “game” changes. The purpose is ensuring all members to adhere to the rules of the game early on. This way, the company vision would be singular as family members are aware of what’s expected in the future.

Fourth, create clear rules and boundaries.
Both in writing and verbally, every family member must be aware of what are expected of them. What the annual, monthly, weekly, and daily goals are and how they can achieve them. Conduct daily meetings, whenever possible, to remind and motivate members to perform. After all, the profits will remain in the family.

Fifth, don’t create “classes” of employees.
Be fair and equal. Every employee has their rights and responsibilities, regardless of they’re family members or not. When they don’t perform, they wouldn’t be promoted nor receiving any bonuses. “Performance” is determined by actual performance, not the “family member” status.

Sixth, hire a non-family member to manage the finances.
Having a non-family member managing finances would reduce the power of family members over those who don’t have direct access. This way, every family member must show equal respect to one another without any “special privileges.”

Seventh, be clear about when an issue requires the involvement of a family council and when it doesn’t.
Don’t confuse “family council” with “board meeting.” Be clear on an issue before you try to solve it.

Eighth, don’t micro manage.
Maintain a “result oriented” business. A goal must be measurable and a project must be completed. The level of one’s performance must be measurable, thus it’s more than “completed.” It must be completed satisfactorily up to professional standard.

Ninth, take a break, let go, and don’t ruminate.
From time to time, take a break from your family and family business. Let things go and don’t ruminate on past issues. When an issue has been declared “solved,” it is. Go to a vacation and return to work refreshed and optimistic.

Tenth, be clear about inheritance.
Write a will. Don’t die intestate and confuse your family members. Be as clear as possible on how to execute your inheritance. We don’t know what the future would bring. It’s better prepare a will early.

Jennifer Xue is the Founder and Chief Editor of SiliconValleyGlobe.com.

Image Source: Pixabay

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