Are you considering ways to grow your business or planning for your retirement? You might hire new employees, bring in outside managers or have family members join the business and eventually take over. Bringing family into your operation could be good business — or, unfortunately, a fiasco.
Some family businesses start out with teen-age children working part-time or during the summers with no intention of joining the operation in the future on a full-time basis. Other family businesses consider this casual employment as a proving ground for future full-time employment and eventual management or ownership roles.
Bringing family members into an existing business can worry non-family employees about special treatment or having to take on extra work because a family member doesn’t know the ropes or wants to do the work. So what can you do to alleviate or mitigate these concerns?
If you’re grooming a family member as a potential successor or future owner, it’s essential to create and enforce a true business working relationship without preferential treatment and maintain the same expectations you’d have of any other employee in that position. Remember: You’re training a potential successor, so it’s important to instill in the family member your goals of a successful transition and a growing business that continues once you retire.
Recognize your family member is like any other new employee. As they gain experience, their confidence will grow. But you don’t want them to become overconfident. At the same time, accept that they’ll make mistakes and help them learn from their mistakes. Treat their mistakes as you would those made by any other employee.
If you were bringing in a successor who’s not related to you, you expect miscommunication and crossed wires as part of the learning curve. The same miscues are going to happen with family members, but the ensuing problems could be more personal and, therefore, more severe.
It’s critical to build trust between you and a family member who’s a potential successor. Lack of trust quickly leads to misunderstanding and dysfunction. Your family member, often your child, must be treated as a peer. That’s a new work experience for both parties. Having a written scope of work and list of expectations offers a valuable way to set the stage for trust-building and goal- setting while reducing the perception — or reality — of preferential treatment for the family member.
Whether your intended successor is an outsider or family member, make sure you have the appropriate financial umbrella in place: a buy-sell agreement, key person insurance, an agreed business valuation and an exit strategy, at a minimum.
Working with family members can be a joy, a nightmare or something in between. Setting rules, roles and expectations improves the experience and ensures your family members know what they’re getting into if they decide to continue the family business and take over ownership.