"Everything good that your company has is generated by you, and unfortunately everything bad is also generated by you." BE
The management of family businesses leads, in many cases, to conflicts in the company or in the family, depending on the characteristics of the family that they lead.
Much has been written about the sources of conflict and crisis in family businesses, we know that they are multiple and that each organization will suffer a different crisis according to the personality of those who run it.
As always, I insist that you cannot generalize in terms of behaviors, actions and strategies to carry out in each company.
Each organization is a unique entity and has its own characteristics and way of doing things and, normally, a successful strategy in one company can be dire in another.
Thus there are family businesses whose management is totally informal and they all do everything, and yet they succeed and grow, or they do not make succession plans and everything fits equally and there are no conflicts or crises when passing from one generation to another. This depends on the personalities and culture of the family.
I used the management feature that I am going to suggest in many of the family businesses that I had to help and it is a way to avoid the normal conflicts that are generated in this type of company.
It is, in my opinion, the only system that avoids conflict since it requires that everything be determined in advance or by the company law in force in each country.
Family Business or Family Business
This is the first distinction that we must make, in order to prepare ourselves mentally to separate the family from the company.
The Family Business is one where there are no clear limits between company and family, authority is parental authority and the older brother has more power than the younger or the male child over the woman, where everyone does everything and the obligations depend on the spirit collaborator of each and not of clear and concrete responsibilities.
Money management is discretionary, if there is money we take more and if there is no we take less, the one who needs the most withdraws and it is normally the father who decides the distribution criteria. Family members come every morning to see what to do, work hard and everything revolves around the company.
This type of structure may or may not be successful depending on the type of family in question, the type of company, the type of market and the situation.
It depends almost exclusively on the vision of the founder, which nobody knows and each one has its own and different objectives.
It is the typical structure found in Family SMEs and is the one that has been written the most. Normally they do not cease to be SMEs in their entire existence, although there are no conflicts, since everything depends on the founder and that culture extends to the next generation and everything becomes dependent on the heir with greater power.
The common representation of Family Businesses is that of three overlapping circles, Davis and Tagiuri, one representing the family, another representing the ownership of the company and the third representing management.
Thus, the founder would be located at the intersection of the three circles since he is part of the family, owner and director of the company. A nephew who works at the company would be at the intersection of the two family and management circles since he has no part in the property. The mother is normally located only in the family circle.
By this representation it is understood that many roles are superimposed on the same person.
On the other hand, the Family Business is the one where the ownership and management of it is carried out by a family.
Where each one of the members is able to separate the roles they must play at all times, at times it is a shareholder and demands financial results, when it is part of management it works with objectives determined by management and is responsible for its work and when it is in family, no talk of work.
The representation of this form of management is that of three separate circles where each member must know where to place themselves according to the role they are currently playing.
Guidelines for moving from Family Business to Family Business
Property
It should be very clear who are the owners and who are not and what percentage of the property each one has.
It is convenient to consider the company as a Public Limited Company (even if it is not legally so) where the owners are shareholders who meet to follow the progress of business and to demand results.
I suggest holding a monthly shareholders meeting in order to control the economic and financial situation of the company.
If the company is a single owner and the children do not have legal ownership of the company, the father can formally or informally distribute 49% of the property to the children so that they learn the role of shareholders.
If there are two families, it should be clear that each one will do their part with respect to the children.
At these meetings they talk exclusively about numbers and results, and about the progress of business.
It's about "playing" at being shareholders, playing a role, demanding results and controlling business numbers.
Management
Management must be professionalized. As in large companies, there must be a formal organization with defined responsibilities and clear objectives for each sector.
Those who manage the company may or may not be family members and all will be evaluated for the results obtained in their sector. Basic premises must be taken into account in order to carry out this management system:
- Mission - Vision It is essential to find a shared vision of "what they want to transform the company", what they want to become, and make that Vision compatible with each person's personal objectives. This is the first work to be done together. Strategy based on that Vision must set objectives for each sector. See Strategic Planning (four articles by the same author). Handling the money each family member will be considered one more employee of the company and will be paid a salary according to the responsibility of the position they hold and the results obtained. This is a very important point to be able to exercise the roles that this management system requires.
In Family Businesses money management empowers the owner and he decides how much to withdraw and how. In Family Businesses those who work receive their salary regardless of the situation of the company, each one has his own money and does what he wants with it.
If the company cannot pay the wages, it has a debt with the owners, and if the owners withdrew more money because they needed it for personal reasons, they have a debt with the company.
It is very important to make this mental separation of the money of the company and the money of the family. Salaries must be assigned at the shareholders meeting.
- Management meetings Management meetings should be held once a week in order to follow the fulfillment of the objectives, the resolution of problems and the corrections of the courses set. All those responsible for areas, whether family or not, must be present at these meetings.
Family
Business is not discussed at family gatherings.
How to go from Family Business to Family Business
It is clear that it is a matter of separating the company from the family, where each one must assume the advantages and disadvantages of each role that they have to play.
When discussing business matters, consider that you are discussing with a partner and not with a parent or child.
The shareholder has nothing to do with management, but it does demand results.
The employee must answer to the shareholders for the results of his management.
It is about professionalizing the management of the company, setting goals and meeting them.
This game of fulfilling different roles and understanding that each one requires is very difficult to carry out without help.
It is helpful to use professional help, ask someone with experience in these roles (a former large company manager, a company director, or a family friend who has held management positions) to be part of the shareholders meetings and direction, at least for a time, until exercise makes it easier to fulfill roles.
Conclusions
It may seem tough having to consider a family member as a partner, or as an employee, and demand accordingly, and if you don't comply, have to fire him or ask him to leave the company.
It is always preferable to work with family members and maintain the relationship before interests.
If there are no conflicts and the company grows or survives, it is more comfortable to work in a Family Business.
But if the company does not grow, or lives in permanent conflict, it is preferable to speak clearly, know what is expected of each one, assume the corresponding roles and professionalize management.
I have seen many companies die from maintaining family relationships and also many families are destroyed by maintaining the company.
If it is possible to separate one from the other, we can propose two types of solutions to save both, one with professional management and the other with love.
