Every business is bound to face challenges and risk of defaulting, regardless of whether it is a startup or an established company. This becomes even more apparent in family owned businesses where the threats they face are unique and may affect the change of success. If these threats are not addressed promptly, they can translate into your personal life, which is the last thing you want while running a family business
As a family business owner, you should be able to identify any potential circumstances or situations that pose a significant threat to your business. Needless to say, the situations may or may not arise from within your business, and more often than not, you will be left to make hard decisions. However, dealing with such issues and continuing the fund growth is what makes a family business successful. Here are the some of the common threats your family business may face.
The biggest threat to any family business is internal conflicts that can arise from various reasons. Usually though, the most common reason why such disputes arise is because of the inability of the business owner to separate professional life from personal life. In fact, it is the most challenging aspect of running a family owned business as separating your emotions is something that you are not taught, but have to learn yourself.
A family feud may very well arise as a result of different interests, personal rivalries, and egos of different family members. The end result is however, the loss in harmony in the business environment. Hence, it becomes almost impossible to achieve your business goals if these issues are not addressed. Over time, these disputes can create an even more hostility at work which may eventually result in employee turnover.
Also known as nepotism in the corporate and political circles, nepotism is the number one killer of motivational drive. This is because when you play favorites and exhibit bias towards your family members working in your business, you are giving out all the wrong signals to other employees in your firm. This not only makes the other employees in your firm lose desire to work, but also makes your family employees less motivated because they start to believe they deserve what they have.
While it is understandable that you would want the best for your family and relatives, there is still very little room for bias when it comes to business. Hiring a relative, paying their salary, and promoting them solely based on your relationship with them can damage the reputation of your business in many ways. As a result, your family employees can start to feel overconfident and may treat other employees poorly based on their status in the business.
Emotions in the Business
One of the most demanding aspects of a family owned business is keeping emotions separate from work. It’s already quite difficult to receive resourceful critical feedback from your board, employees, and peers. However, when doing so with a relative, it becomes even more difficult, as they may not be providing you with resourceful feedback based on your relationship with them.
Subsequently, this behavior makes you look vulnerable in from of your customers and employees who start to realize that you are having difficulties in making business decisions. At the same time, these can translate into issues in your personal life if you, for instance, scold one of your family employees. The point here is that maintaining a balance between emotions is what leads to a highly productive work environment.
Losing Other Employees
If family is what you want to support in your business, regardless of how productive they are, then there are going to be workplace conflicts. More often than not, these workplace conflicts lead to the other employees leaving your business. This is because when the onset of an organization is shrouded with conflicts, disputes, and no clear sense of direction, an employee who wants to grow and provide the basic necessities for his/her family may very well quit.
In businesses where promotions are mainly reserved for the family members, an employee won’t take long to realize that they have very limited room for growth in the business. This becomes even more apparent when your family employees start to abuse their position in the firm for their personal gains. Hence, anyone who wants to grow in a firm will likely leave because he/she does not see a future there, nor any resourceful experience that can land them better jobs later on.
As a family business owner, it is important that you realize the true worth of your employees and what their skills bring to your work environment. Hence, by having a good balance between family and other employees in the higher hierarchy of your organization, you can make it clear to all your employees that their good work and determination will be rewarded.
If you have managed to deal with all the aforementioned issues, you still have a very big decision to make that may decide the fate of your business. As it is, only 45% of family owned businesses are able to transition from generation to generation. This is because most businesses fail to have a competent succession plan in place.
As such, when someone retires from the company or passes away, you are left at a huge risk, especially if that someone was a decision maker in the firm. However, this can be easily avoided by drafting a succession plan beforehand that is built on a sustainable model. If not, then your business may just suffer the similar fate that 55% of family owned businesses have.
In any business, whether public, private, or family owned, the threats and risks can always be identified and assessed. However, in a family owned business, there are more threats and risks that you have to deal with that may have a profound impact on your professional and personal life altogether.