Welcome back to our series on family business. Last week we discussed the first M – money. Next week we will look at one of the biggest issues faced by family business, which is moving on – but for now, let’s talk about managing a family business.
This is a bigger issue than most people think - by definition, family business is managed by one or more members of a single family. This makes the majority of SME’s family businesses.
In the early stages of a family business, the business is owned and managed by Mum and Dad, which means issues of accountability rarely arise. Over time, as Mum and Dad prepare to retire, the issue of effective management will typically become important as the founders lose their drive or wish to develop other interests.
Here are four ways to keep this from becoming a problem in your business:
1. Think big.
Ideally, your family business should be governed by a board of directors to ensure that a balance of skills and perspectives are available to guide the business. It is very unlikely that one or two people can wear all the hats!
For most family businesses, the reaction to this would be ‘we’re too small’. It is interesting to note that a majority of small businesses surveyed in the recent KPMG Family business survey reported that their business is governed by a board or family council. By subjecting their business to the discipline of formal corporate governance, the business will have a better chance of growing and thriving.
If you treat your small business like a big business, it will have far less growing pains.
2. Think strategically.
Surprisingly, 90% of family businesses reported having some kind of strategic plan…this is good news! By thinking strategically, the business will be in a position to grow and be of benefit to the family for many years to come. This can enhance the opportunities for smooth succession.
If you do not have a strategic plan, now is a good time to take time out from your business and work on it – but you will need external help, and that’s another topic for another day!
3. Think realistically.
While a family business is a lovely concept, you need to be realistic when it comes to the management abilities of your family. Just because the favourite son sees himself as a great salesman, he shouldn’t necessarily be the sales manager!
Subject your family members to the same recruitment processes as regular staff to avoid setting your business – and the family member! – up for failure.
4. Think of having trusted advisors.
You may be in family business because you inherited it, or because you knew the technical work of the business. However, as your business grows, the skills needed to successfully manage the business will change. A wise manager realises how much he doesn’t know and isn’t afraid to ask someone who does know!
It’s important that the general manager understands all aspects of the business, but they also need to be prepared to release control of most of the day-to-day running to those who are more skilled in those particular areas.
Management is a tough part of any business – but managing a family business where the shareholders are related and possibly biased is a huge job. Asking for help is a sign of wisdom, not weakness.