How To Deal With Family Business Problems

How To Deal With Family Business Problems

Are you in a family business, and you’re wondering how to deal with the problems that arise regularly?

Perhaps, you’re fed up with being in business with your family members because of one dispute or the other?

Hence, you’re considering exiting the family business.

It turns out that running a business with family members, although it is one of the most rewarding experiences, can be quite challenging.

However, how do you navigate being professional and friendly at the same time without getting at each other’s throats?

Or even if you’ve already had existing issues, how do you resolve them?

Before you give up on you’re family business, there are certain steps you can take to deal with family business problems that you might want to consider.

Giving up and exiting/dissolving the family business should be the last resort if all things fail.

Therefore, pay attention to these tips on dealing with family business problems without letting them escalate into something bigger.

Before then, let’s explore some of the challenges that arise in a family business.

The chances are, you might be familiar with one or two of these challenges.

Challenges Family Businesses Encounter

It is essential to note that all family businesses have their distinct set of problems.

This is because conflict is a natural part of human relationships and business.

Business problems or challenges may range from the dwindling economy, screening employees, or recognized competition.

Family-owned businesses are no exception.

In fact, family businesses often go through a different set of challenges and these common issues.

Let’s look at the most common ones.

Existing Family Factors

Existing issues in the family can make the family business uncomfortable to work in.

If family members often lock heads in the family setting, then there is a possibility that this bad blood will be transferred to the business setting.

Lack of Succession Plans

Sometimes family businesses are not often futuristic.

They let their guard down, thinking that unhealthy rivalry may not arise.

They do not have plans for who should take on the business.

Hence, there may be a ragging war between family members to claim the company in sudden death.

No External View

Sometimes, family members may feel too territorial to let non-family members come into the business.

This may bring about the lack of external views or perspectives.

This leads to a situation where family members have similar opinions on things, mostly due to similar upbringing.

More so, ideas will always seem the same.

Consequently leading to a lack of innovation for the company’s growth.

Lack of Training

A family member may be hired strictly based on the relationship instead of qualification.

There may be pressure to do this.

Also, not doing this may cause tension between involved members as well.

This only leads to incompetent family members occupying important roles in the organization.

As a result, setting the family business up for failure.

Mismanagement of Resources

Family members tend to abuse and touch the business resources for personal purposes.

This often causes serious problems in the business when other family members discover this.

Undefined Roles

Because it’s a family business, there’s the possibility for family members to want to put their efforts into different aspects of the business to keep it afloat and thrive.

While this may prove effective at the initial stage of the business, it can be bad for business in the long run.

It often leads to a situation where each family members lack specific roles in the business.

Thereby resulting in role confusion, conflict of interests, rivalry, and the struggle for control or power.

In a nutshell, these are some of the challenges people struggle with in family businesses.

However, there are certain things you could do to deal with these challenges and prevent problems from coming up in the future.

How to Deal with and Prevent Family Business Problems 

1Keep Emotions and Attitude in Check – How to Deal with Family Business Problems

One of the things that ruin most family businesses is too much familiarity.

Family members become too familiar with themselves and act disrespectfully to each other even in the business environment.

This often leads to situations where family members behave rudely to each other.

Consequently, stirring up strife that threatens the stability of the family business.

Likewise, family members tend to be sentimental and oversensitive to issues.

This might make the family business a breeding ground for misunderstandings.

To deal with and prevent future problems in the family business, family members should learn to keep their emotions in check.

Also, family members should be professional and treat each other as colleagues, especially in the business environment.

This would foster mutual respect and prevent family problems.

2Prepare the Subsequent Generation – How to Deal with and Prevent Family Business Problems

There is a Spanish saying that captures the whole dilemma that has plagued family businesses for centuries.

The whole concept is that the father starts the business on good ground, the son squanders the profit, and the grandson is born into penury.

It is called a family business because it is owned by family members and can be inherited.

Hence, it should transcend generations and still maintain its relevance.

Research shows that unpreparedness to take on a family business is one of the reasons for family business failures and other related challenges.

Therefore one way you can tackle family business challenges and avoid failure is by preparing the subsequent generation.

Make sure to educate them on how to run a business, the challenges, and the successes.

If there is a plan to take on the business, this training should start earlier on.

Since they are already family, let learning about the business be a family norm/tradition for the upcoming generation.

If they are young, start by introducing them slowly.

Also, make them run easy chores so that they can want to learn more.

Note that preparing family members to carry on a business is the most legitimate legacy a family business could ever achieve.

Above all, ensure that family members are trained and take business doctrines seriously to deal with the lack of training or experience that might cause in the family business.

3Avoid Nepotism

Another leading cause of family business problems is nepotism.

This has to do with preferring one family member or outsider over another.

It is also one of the leading causes of incompetency and inefficiency that characterizes many family businesses.

Thereby contributing greatly to the failure of the family business.

Giving positions out to your favorites without any merit can lead to unwanted tension.

Also, pardoning one person and punishing the other or paying them more is a route you should never take.

This could also make members lose interest in doing their jobs well.

Family members will start to view each other as competition which will, in turn, affect the outcome of production.

We would not even recommend that you do it in private.

Treat everyone equally to avoid problems.

4Bring In Experts – How to Deal with Family Business Problems

Experts could also help you appropriately deal with family business problems.

These are trained professionals with the right skills to help family businesses navigate the challenges resulting from misunderstandings in the family business.

They have encountered many other cases before.

Hence, they are well-acquainted with the right strategies for resolving family business problems effectively.

Now, what is the function of these consultants, you might say?

They could improve leadership development and help the family business transition successfully through events like death, divorce, or illness in the family.

Also, they could draft succession and retirement plans and redeem financial losses or stagnation.

They could also guide you on building a strong structure of checks and balances in the family business to curtail negative behavior and conflict.

Above all, some issues, as we can see, could be well over the top and difficult to resolve.

This is where the help of trained consultants will be needed.

5Opt for Plan B (Exiting the Family Business)

We’ve shared some ways to deal with family business problems and even suggested bringing in an expert.

However, if all measure proves abortive and the family business problems escalate what do you do?

This is where the exit strategy becomes useful.

This means that the business owners or shareholders can sell some of their shares or exit the business completely.

However, this should only be an option when the problems have eaten deep into the enterprise, and there is no other way out.

In addition, represent this decision on a legally binding document.

Selling the business will be a better way to move forward and prevent family members from tearing each other apart.

How to Prevent Family Business Problems

How do you make sure these existing issues or new ones do not resurface?

Here are a few precautions to take…

6Establish Effective Communication Principles

Communication is the central line for the resolution and prevention of all conflicts.

Every working member of the family should learn to air their grievances politely and respectfully.

This should be done effectively through set down rules earlier agreed on.

Furthermore, team communication is indispensable for the growth of the business.

George Bernard Shaw once said, “The single biggest problem in communication is the illusion that it has taken place.”

Therefore, try to avoid the assumptions that a meaningful conversation has taken place when it has not.

Overall, clear and effective communication will ensure that there are no misunderstandings that could stir up trouble.

7Understand Each Other’s Strengths

Learn how to prevent family business problems by understanding each other’s strengths and weaknesses.

By establishing clearly defined roles and duties, you can prevent the incidence of role confusion and misunderstandings.

This strategy should provide an order needed, especially in family businesses, as several things may divide attention.

The respective skills that each family member possesses are not only to decorate their resumes.

Make sure you utilize these experiences in the business.

This also helps you get the best out of their performances as everyone will be doing what they know how to do best.

As a result, fostering growth in the family business.

In all, take advantage of everyone’s strengths by assigning them roles that match their abilities.

This will prevent neglect of duties, role confusion, and conflict of interests.

8Ascertain That You Have the Same Goals from the Onset

To prevent family business problems, you should ensure that everyone is on the same page from the get-go.

You need to ensure all family members have the same plans for the business as you do.

Aligned interest is one of the secrets of long-standing family businesses.

The family business will move forward by setting goals and working closely together to achieve them.

Also, this makes the members not feel separated from the management.

Furthermore, having the same goals will ensure that everybody’s cards are on the table.

Undoubtedly, you wouldn’t want a situation where some people would be willing to risk everything to see the business succeed while some just won’t care.

In a nutshell, everyone’s interest in the business needs to be aligned and give their all to facilitate the company’s growth.

9Carry Everyone Along

When making decisions about the company, make sure to keep every member informed about them.

This will make everyone feel included in the company’s growth.

This will also eliminate any contempt or feeling of neglect that will or may arise and stir up troubles in the family business.

10Never Sweep it Under the Carpet/Ignore Red Flags

Earlier, we talked about enforcing the principle of effective communication.

The worst way you could ever go about preventing family business problems is shoving them under the carpet.

In fact, this is one of the leading causes of serious family business problems.

Immediately any member of the family business behaves unacceptably, call them out on it, and tackle it.

Do not overlook issues.

When you are strict with your ethics, it will be harder to go against them.

When you keep ignoring the red flags, it escalates issues and makes them too overwhelming to handle.

11Enforce Steady Structures to Prevent Abuse of Privilege and Further Family Business Problems

Enforcing steady structures and implementing them is good for business.

This helps to curtail excesses and ensure orderliness in the organization.

Overall, it will prevent instances where family business members will do as they please because it is a family business.

12Everyone should be Accountable

This involves holding family members accountable.

A stable system of accountability ensures that family members take full responsibility for their actions.

This shouldn’t just apply to non-relatives.

Accountability will fuel a successful business hierarchy and organization.

It is also important to ensure that other family members are not punished for the mistakes of others.

Thereby preventing unnecessary bad blood and contempt that could arise due to this.

13Put a Succession Plan in Place – How to Deal with Family Business Problems

Drafting the succession plan is a step toward avoiding lots of family business problems.

KPMG 2018 Family Business Survey Report stipulates that only 17% of family businesses have a set-out plan for succession.

Do not be under the illusion that the current leader will lead forever.

A time will come where you will have to hang your boots and quit the business.

Therefore, pick the successor, and it has to be someone who is competent, educated, versed, and ready to lead.

Ensure that you discuss this decision with all family members, so it doesn’t take anyone by surprise.

Again, do not pick a favorite or an oldest.

Let it be someone who has shown themselves worthy and deserving of the position.

This tip will help prevent crisis in the case of sudden death.

Wrapping Up on How to Deal With Family Business Problems

Overall, we have established that family business problems could threaten the stability of any family business.

Likewise, it could also cause a rift between family members.

However, how you confront these conflicts makes all the difference.

If you wish to help resolve the rifts that challenges have created in your family business, then put these simple tips to use.