I recently read how the Murdoch family was in a bit of a spat over their $6 billion dollar family empire, which includes Fox News. It got me thinking, of course, about us small business owners. Many of you have family businesses – how can you grow them and nurture them to success?

Family businesses are the cornerstone of many economies worldwide, accounting for two-thirds of all companies globally and generating about 70-90% of annual global GDP, according to the Family Firm Institute. However, the unique dynamics of mixing family and business can present both extraordinary opportunities and significant challenges.

Related articles – Hiring Your Family. The Good and the Bad

1. Establish Clear Governance Structures

Implement a Family Constitution

Develop a formal document outlining the family’s values, vision, and policies for business involvement. This serves as a roadmap for decision-making and conflict resolution.

Create a Board of Directors

Include non-family members to bring outside perspective and expertise. This can help professionalize the business and mediate family disputes.

Define Decision-Making Processes

Clearly outline how major decisions will be made, whether by consensus, majority vote, or executive decision. This transparency helps prevent conflicts and ensures smooth operations.

2. Professionalize Management Practices

Define Clear Roles and Responsibilities

Create detailed job descriptions for all positions, including those held by family members. Ensure that roles are assigned based on skills and experience, not familial ties.

Implement Performance Reviews

Conduct regular, objective evaluations for all employees, including family members. Use standardized criteria to ensure fairness and drive professional development.

Invest in Training and Development

Provide opportunities for both family and non-family employees to enhance their skills. This demonstrates a commitment to merit-based advancement and helps retain top talent.

3. Foster Open Communication

Hold Regular Family Meetings

Schedule frequent gatherings to discuss both business and family matters. This helps maintain transparency and allows for proactive problem-solving.

Establish Conflict Resolution Mechanisms

Develop a formal process for addressing disagreements. Consider using a neutral third-party mediator for complex disputes.

Encourage Diverse Perspectives

Create an environment where all family members, regardless of their role in the business, feel comfortable sharing their views. This can lead to innovative ideas and stronger family bonds.

4. Plan for Succession and Continuity

Start Early

Begin succession planning at least 5-10 years before any anticipated leadership transition. This allows time for proper training and a smooth handover.

Consider All Options

Be open to non-family members taking leadership roles if they are the best qualified. This can bring fresh perspectives and help the business adapt to changing markets.

Prepare the Next Generation

Provide opportunities for younger family members to gain experience both within and outside the family business. This broadens their perspective and enhances their credibility when they eventually take on leadership roles.

5. Maintain Financial Discipline

Separate Personal and Business Finances

Establish clear boundaries between family and business assets. This protects both the family and the business in case of financial difficulties.

Implement Professional Financial Management

Employ qualified financial professionals to oversee accounting, budgeting, and financial planning. This ensures transparency and helps prevent financial mismanagement.

Reinvest in the Business

Resist the temptation to treat the business as a personal piggy bank. Prioritize reinvestment to fuel growth and ensure long-term sustainability.

6. Preserve Family Values While Embracing Change

Document Family History and Values

Create a formal record of the family’s history, including key milestones and core values. This helps maintain a sense of identity and purpose across generations.

Stay Adaptable

While honoring tradition, remain open to new ideas and changing market conditions. Encourage innovation and be willing to pivot when necessary.

Balance Family and Non-Family Employees

Create a culture that values both family legacy and professional expertise. Ensure that non-family employees feel respected and have opportunities for advancement.

7. Prioritize Work-Life Balance

Set Boundaries

Establish clear guidelines for when and where business discussions can take place. This helps prevent work from dominating family life.

Encourage Outside Interests

Support family members in pursuing hobbies and interests outside the business. This can reduce stress and bring fresh perspectives to the company.

Promote Mental Health

Recognize the unique pressures of working in a family business and provide resources for mental health support when needed.

Conclusion

Successfully managing a family business requires a delicate balance of professional acumen and family dynamics. By implementing strong governance structures, fostering open communication, planning for the future, and maintaining financial discipline, family businesses can leverage their unique strengths to thrive across generations. Remember, the goal is not just to preserve wealth, but to create a lasting legacy that honors family values while adapting to an ever-changing business landscape.