In my first article in this series, we looked at the difference of being an SME versus a family business. If we think about ourselves as a family business, we need to think about exactly what this means for us, how we grab the advantages and how we manage the tricky areas.
You can think about this from two perspectives: what we do publicly and what we do privately in how we run and manage our business.
The public face
First, publically — this is easy. The first thing you should be doing is telling people about your family business!
Recently research on trust has come out of Edelman. The Edelman Trust Barometer conducted a huge range of interviews with over 15,000 people worldwide on a number of core business issues. One of the reports they published was on family business. The findings were interesting…
Firstly, they found people preferred to buy from family owned businesses. Even better, they found that people are prepared to pay more for a product or service if they know you’re a family business. From an employee’s perspective, they preferred to work for family-owned businesses and were far more productive when doing so. In a nutshell, family businesses are trusted.
You’re likely not telling your customers you’re a family business.
People like family businesses because they (rightly) think they provide a great service or product, treat their staff well, have a long-term perspective and are not owned by some faceless corporate that sends its money overseas.
So, look at how you can get your message across in your marketing to let people know that you are family-owned. There is a “We are a New Zealand-owned family business” logo available to genuine family businesses to use in your marketing. And, at the very least, tell them on your website, in your shop window and in any of your marketing that you are family-owned — people like it.
The private side
Moving on to how you operate privately — what we do as a family and how we manage the family and business relationships is critical.
As mentioned last time, if you are a family business you are, by definition, mixing family, ie. love and money, with the careers and jobs of family members. For example, when one of your employees (who happens to be a family member) screws up, how do you have the conversation with them about their performance?
One family business owner said to me recently, “When I need to bollock my son, who has really screwed up with a client, am I his mum or his boss? He’s going to react badly either way!”
This is what we call a ‘hat’ issue. What we mean is, you need to ask yourself which ‘hat’ you are wearing? Is it your ‘mum hat’ or your ‘boss hat’? In family business, you wear many hats. You could be wearing the hat of mum or dad, husband, wife, CEO, director, shareholder, supervisor, head of sales, oh and head financier! The ‘hats’ you wear can be countless.
The challenge for all family businesses is to know which hat you’re each wearing and when. Therefore, continuously check in on what the conversation is you’re having. Is it mum having a nice chat to her daughter, or is it employer talking to an employee? This is a crucial issue. And, as your business gets bigger and more complicated, it becomes even more important.
Another example is expectation of family members who work in the business. Is this a serious career for them or just something part-time? If it is serious, are they thinking they may take over the business at some point? What if more than one family member wants to take over the business? Do the family members have the required skills and knowledge? What if you need them to buy the business from you (because it’s part of your superannuation) — are they able to get that sort of finance?
There are many other issues that families who work together face. Part of all this is balancing fairness across the family. The ‘F’ word, as fairness is known in our business, is critical. Never underestimate just how closely family members monitor whether they are being treated fairly or not. For example, if one family member works in the business and one doesn’t, the one who doesn’t can sometimes feel like the other is getting special treatment; you may take them to conferences or out to dinner with clients. There may be extra perks that the working family member gets that the non-working family member does not. And, of course, sometimes just offering one family member the opportunity to work in the business can be viewed unfair by others… It is a constant juggle.
What makes it worse, is that you may feel you are being scrupulously fair but, because it is not transparent enough, the non-working family member starts seeing all sorts of conspiracy theories.
These are just some of the examples you need to actively manage. The temptation is to ignore these and assume that they’ll just go away.
The smart money says they won’t.
The secret to all successful family businesses is the ability to have the conversations you need to have, early; address the issues before they become serious, be transparent and manage the expectations. Do this and you’re well on your way.
While some of this may seem somewhat daunting, the upside is very much there. Family members are loyal. They genuinely feel part of the business and want it to do well. They are often prepared to go to lengths that normal employees just won’t and their ability to relate to customers is often far superior to other staff.
Never forget, you’re building something that has real meaning; a legacy that is the pride of the family and has the potential to benefit future generations lucky enough to be born into it.
Philip Pryor is a family business advisor and has worked with family businesses for 25 years. He applies his strong business and strategy expertise with a deep knowledge of family psychology, conflict resolution and negotiation to help clients. Contact: 0274 118 820 email@example.com