Do you remember watching ‘The Godfather’ movie and thought, “Gosh, I want a booming family business just like this!”…well, minus the drug-dealing part.
From the outside, a successfully run family business always seems glamorous, like a bed of roses. Think of family dinners, vacations, laughter, dramas, and the bond they share. What could go wrong?
Not everything seems as it is. Many family businesses go under after a while for many reasons. If your family owns a family business, or you are considering starting one, you must know a few things to ensure you avoid the pit of failure. Let’s dive in.
- LACK OF PRESET POLICIES
Family conflict is a constant feature. It’s hard to manage relationships with family members with conflicting views. When in business with such persons, many may fall short of professionalism because such persons may tend to bring family feuds into the workplace. That gives room for bad decisions because they stem from an emotional and not rational place.
One way to avoid this is to set very early on in place conflict resolution policies that ensure best practices are followed through at all times.
- CLASH OF IDEAS
The phrase, ‘too many cooks spoil the broth’, is very accurate in family-run businesses. The business is positioned to fail when major decision-makers have different views on core values and missions.
For family businesses to thrive effectively, all parties must follow business policies down to the letter. Where objective rules guide the business, it is positioned as a separate body from the family.
- LACK OF FINANCIAL EDUCATION
It is not rare to see family business successors unequipped with financial and managerial expertise to run the business. That leads to poor decision-making and mismanagement of the family’s capital. That is a risk to the business.
From a tender age, leaders at such organizations should do well to nurture a sense of responsibility, stewardship, history, and family values in their immediate successors and generations to come.
- UNMERITED LEADERSHIP
The promotion of unqualified family members into leadership positions is another reason why family businesses tend to fail.
Many things go wrong when an unqualified person steps into a leadership position. The typical consequence of this action is a deviation from the business culture and resentment settling in the hearts of qualified employees.
A safe way around this is to set up policies outlining the requisite experience a person needs to possess to assume certain positions. That guarantees transparency, efficiency, and scalability.
In this article, we have identified that the dynamics of running a family business are quite different from that of running a standard business operation. So many intricate details and necessary steps need to be taken to ensure success.
Being able to find a balance between personal and professional areas will be beneficial to the running of any family business.
It is noteworthy that some of the long-standing corporations of the world today are family-owned businesses. That further proves that family businesses, when done right, can have the ability to grow into legacy businesses that stand the test of time.