RUNNING A FAMILY OWNED BUSINESS
Last week something interesting happened in the world of South African soccer that left many fans in tears and disbelief. It was the final game of the league season and the team that was leading for the majority of the season, Kaizer Chiefs lost. This left soccer fans puzzled and some devastated. Angry supporters have made their feelings known on various media platforms and on top of the list of grievances is the issue of the club’s top management. See, the club is a family-owned business, and the team manager is the oldest son of the founder of the soccer team. Many Kaizer Chiefs fans see the son as a liability to the soccer team and are calling for his removal as the club has been consistently failing to deliver. In other words, the son is proving to be a liability for the brand. Removing him from the position will not be as easy as most soccer fans hope. This is but one of the challenges in running a family-owned business.
We all know of very successful family-owned businesses like the Oppenheimer’s, Ruperts, and the Maponyas. Some of the biggest companies in the world are family-owned. Family-owned businesses are also a key part of SMEs as well. In our practice, we have encountered several clients who run their businesses with family members, and there are plenty of advantages to this. Family businesses tend to be perceived as more trustworthy, stable, and customer friendly. This could be a good story to tell and an added advantage to the business’s branding and marketing, even more, where the family has a good history. It also provides a good succession planning mechanism to the business, which is something most SMEs struggle with. Once the founder retires, there’s usually no one to take over the business. With a family-owned business, the next generation can be trained from a young age to run the business and by the time they are grown, they know the ins and outs of the business.
Challenges of a family business (and how to deal with them)
While there are lots of benefits for running a family-owned business, no doubt there are challenges that are unique to this form of business since it is governed by people whose lives are financially and emotionally intertwined. Below are a few challenges to overcome if you are running or thinking of running a family-owned business.
1. The separation between personal and business
The dual-role relationship is the biggest challenge faced by many family-owned businesses. When you work with your spouse, sibling, or child, it can be challenging to keep your personal relationships out of your work and vice versa. The involvement of money can also cause tension between family members if there is no transparency or clear ownership structure in place.
It is, therefore, vital for family members to establish clear boundaries when dealing with each other. It needs to be clear which hat each person is wearing at a particular time. Wherever you can, you need to try and create space within family members when at work. Finally, you must create a work environment that is comfortable for other co-workers who are not family members as things could get out of hand at work if family members are not getting along.
2. Fitting jobs to family member’s skills
Too often, family members are appointed to positions within the business for family reasons. For example, the CEO has to be the oldest son or certain family members have to hold certain positions. The problem is that if you appoint family members to jobs that do not fit their skills and experience, it often has dire consequences. It is even worse if there are no clear policies about the qualifications that family members need in order to be considered for jobs in the business. A family-owned business is also an environment that is likely to face some “entitlement” battles where certain family members may demand benefits that exceed their capabilities and therefore their contribution. The business must, therefore, create employment policies that apply to everyone and it must be clear that the same policies apply to family members as well. This will eliminate any misunderstanding or assumptions about family participation in the business and will assist in communicating with future generations on what is expected of them if they want a seat at the table. As a leader in family businesses, you should set stringent criteria for each position opening in the business and make sure that only family members with legitimate qualifications and experience are considered.
3. Fair Remuneration
Paying family members fairly can be tricky in a family business as some may feel that they are contributing more than others, yet the shareholding may be the same for everyone. This may cause resentment between family members if it is not discussed honestly and openly by the family. The family in business must get in the habit of having family meetings to discuss staff placements, fair remuneration, shareholding structure in the business, and any unique financial considerations that may arise. This must be done in a transparent manner.
4. Planning for the future
Like with most businesses, family-owned businesses also face challenges of succession planning. You, as a founder or leader may have wishes to pass on the business to the next generation who may have no interest or capabilities to run the business successfully. Another issue that could cause a rift within the family could be a member that does not want to transfer power and therefore delay planning for succession. Where families wish for the business to remain in the family, then crucial steps should be taken early to get family members involved in the business. It would be best if you made sure that the successors have the necessary skills and experience to take over the reins. It must be made clear as early as possible to the family how succession will work.
It is evident from the many successful family-owned businesses that challenges can be overcome with a few tricks, and the family can go on to run a very successful business. It just needs for every family member involved to pull together. As for Kaizer Chiefs, we may not know what the outcome will be for next season, but what we do know is that they are facing challenges likely to affect many family-owned businesses. The family will need to do some introspection and decide on the best way forward for their soccer team’s success, and we wish them well.
The Accounting Village has the expertise to assist you in growing your business, please feel free to contact us here.