10 Rules of Building a Successful (and Fun) Family Company
Owning a business is difficult enough, but owning a family business?
That can be doubly hard. Whether you're bringing work home to your spouse who's also your partner, teaching an older generation about the importance of changing with the times, or sharing turkey on Thanksgiving with someone who made a recent business decision you strongly disagree with, owning and working in a family business has a unique set of challenges.
My wife has been my business partner for the past seven years, and even though we've had our share of disagreements, we've been fortunate enough to build two fast-growth companies over that time. To better understand how to build successful family companies, I talked with a true expert.
Craig Palubiak is the author of Ten Tactics for Successful Family Companies. He and his family have been involved in and with family businesses for their entire lives--most recently with his son Steven in a consultancy for family businesses. Here are Palubiak's 10 tactics to build the most successful family company:
1. Personal Assessments: Who Are We? The quality of interaction determines the success or failure of the family business. It requires each family member to be able to answer the question "Who are we?" Each person should know what personality style he or she and his or her family members leans toward. These include Personal Power, People Power, Team Power, and Quality Power. Once there is an understanding of each person's personality styles, family members must learn how to adapt to minimize friction and maximize efficiency.
2. Goal Setting: Company vs. Personal. One critical criterion for company goals is that they motivate all generations within the family business. The potential disconnect between generations is easy to make and must be realized and resolved before "buy-in" can be attained. Each person must write down and share his or her personal and business goals for specific time frames. Palubiak suggests six months, 12 months, and 36 months.
3. Corporate Mission: Common Purpose. Family businesses have a greater need to create and implement a clear, compelling, unifying company mission statement. This is owing to the complex patterns of relationships and behaviors in these companies, especially between family and nonfamily employees.
4. Employee Partnership: A True Benefit. You need good people to grow. They must run the business as if it were their own. The potential for partnerships with employees at family businesses is critical because of the shared sense of commitment and requirement for respect between all individuals. To eliminate the common "us against them" attitude, use empowering job titles, be clear about what is expected, ask them for feedback and ideas, and inform everyone regularly on company performance.
5. Employee Feedback: A Direct Link. The employee (family member or not) is the ultimate link between management and the customer. The ability to communicate openly, regardless of whether one is related to the family that owns the business, is absolutely essential. Obtaining employee feedback can be designed in a free-flowing format or structured on a more formal basis, such as being facilitated by a third party using a process known as Employee Perception Assessment.
6. Organizational Chart: Who and Where. Who is doing what, and who should be doing what? Who reports to whom? Who is accountable for what? You must visually display the organizational chart for each member of the family business to see and easily understand. Reevaluate this chart every year. When family members are put in jobs they are not suited for, it erodes the family dynamics.
7. Building Strengths: Education and Coaching. Many family-owned businesses do not have adequate systems in place, and the people who work at those companies aren't being properly coached to be managers/leaders. Often, the first generation simply doesn't trust its kids and isn't supporting their growth and development. This causes an urgent and unmet need to educate and coach the younger generation to become the next leaders of the company. Kids shouldn't be allowed to just wait for their parents to retire. They must know the ins and outs of the company.
8. Business Growth Strategies: The Direction. You must analyze the market and select the right races to compete in. The only way for any business to survive in today's dynamically changing marketplace includes keeping pace with radical social, technological, and other disruptive changes. Too often, the older generation is caught in its old ways and won't adapt to the realities the younger generation can see. There are three primary growth strategies family businesses can choose to focus on, which include:
1. Intensive growth--market penetration, market development, product development
2. Integrative growth--backward integration, forward integration, horizontal integration
3. Diversification growth--concentric diversification, horizontal diversification, conglomerate diversification
Empowering the younger generations to do competitive/marketplace analysis will help you choose which growth strategy(ies) to implement.
9. Business Plan: The Implementation. It's impossible to implement a vigorous growth plan for your family-owned business without a sense of communal buy-in. Palubiak suggests family members (and other employees) carefully review and assess progress toward key strategic goals once every 90 days. It's impossible to overstate the importance of establishing and holding to a pattern of 90-day review and assessments. Then, benchmark against your company and competitors. These key performance indicators, or KPIs, and flash reports are really team-building tools and help all generations within the company work efficiently and effectively toward the strategic goals. Finally, leverage your professional team (accountant, financial adviser, attorney, banker, etc.) to help support your business plan and strategic goals.
10. Celebration: Pop the Cork! Many family businesses don't find enough reasons to celebrate in the workplace. If your family employees' achievements and hard work are not being celebrated in the workplace, then how do you think they will feel at home/family get-togethers? Celebrating once a year, such as a holiday party, is not enough. Try the 90-day rule again, and focus on celebrating hard work and achievements for those 90 days. A brief, informal one-on-one conversation with your son or daughter acknowledging him or her for a job well done is incredibly important.
These simple actions will tremendously enhance both your personal and business life! These 10 practical tactics will help any family company (or even any nonfamily company) focus on what's important and do the work to assure growth and success over a sustained period. Now it's your turn.
What are your challenges in running a family business, and which tactics do you focus on? Please let me know your comments and questions in the Comments section below.
DAVE KERPEN | Columnist | CEO, Likeable Media
Dave Kerpen is the CEO of Likeable Local. He is also the cofounder and chairman of Likeable Media and the New York Times bestselling author of Likeable Social Media and Likeable Business. Want to learn about how to grow your business using social media in 2 minutes? Click here.