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Avoid These 4 Family Business Sins

Sarah Schafer


January 24, 2022


Here's how you can avoid committing these harmony-harming mistakes


Family business is tricky. Profit goals can clash with personality dynamics. Unqualified people might lead key positions. Talented and motivated children might feel stuck in a predetermined path.


“There is great power and commitment in a family business,” says Val Farmer, a clinical psychologist who specialized in family relationships during his 30-year career. “But the family must get along and the business needs to make money.”



To meet your family farm’s goals, avoid these common missteps.


UNDEFINED ROLES


Family businesses often require an all-hands-on-deck model. “Children and parents, husbands and wives, extended family members and different generations may serve as employees, managers, shareholders and advisers at various times,” says Cari Rincker, principal attorney with Rincker Law. “These overlapping and potentially unclear roles can be a source of conflict.”


Match family members to the roles that best suit them, she suggests. Create specific expectations for everyone and respect the boundaries of their duties.


“Clear responsibilities help create ownership of and respect for business roles,” Rincker says. “It is nice to know others can jump in when needed, but when roles become too blurred, conflict can result.”


BLURRY BOUNDARIES


Farm families can easily slide between business and family needs and priorities, but they need to separate the family dynamics from the business itself, says Rena Striegel, president of Transition Point Business Advisors. Conversations need to be clearly business discussions or family discussions.


“When we separate those, it makes it easier for farm families to communicate and make decisions together as a group,” Striegel says.


DETRIMENTAL NEPOTISM


Of course, you want to favor relatives in a family business, but they must be qualified. “Adult children or siblings who are lazy, selfish, addicted or dependent rob the rest of the family members in the business of enthusiasm and motivation,” Farmer says. “Working around someone while walking on eggshells or carrying their load is no fun.”


Analyze how you treat, motivate and promote family members versus non-family members, Rincker adds.


“If nonfamily workers are held to a different standard than family workers, they will be difficult to motivate and retain,” she says. “A level playing field in terms of treatment and advancement is essential. A merit-based culture that holds everyone to the same standards can motivate everyone, whether family or nonfamily, to achieve more.”


ECHO CHAMBER


Family members often find a groove or don’t want to rock the boat. As a result, original ideas or new strategies stop surfacing. To avoid an echo chamber, consider an advisory board, Rincker says.


“A board can help ensure business decisions are handled professionally,” she says. “Consider nonfamily board members as they can improve the business’s prospects of managing and attracting both family and nonfamily talent.”


The Best of Both Worlds


Well-run businesses take on the caring qualities of successful families, says Val Farmer, a clinical psychologist and author. On the flip side, well-run families take on business sensibilities of successful businesses. Farmer says these are the qualities of successful family businesses that find that perfect middle ground.

  • Share a vision and commitment for long-term goals. They invest money and time to improve the abilities of their members.

  • Involve its members in the process of management and leadership.

  • Have systems of communication in place where ideas at the operational level are heard and make a difference.

  • Delegate responsibility and decision making to the lowest level possible.

  • Give abundant recognition and appreciation for the work being done.

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