by Susan Hileman, NWIRC Strategic Business Advisor
What makes family-owned businesses different? Some owners state their success—and perhaps their very survival—is related to the fact they are family-owned. Studies have shown family-owned businesses can out-perform other types of businesses by offering a solid continuum of leadership and low turnover. They are often debt free or cautious about capital investments which can protect the business during economic downturns. Other studies show just the opposite. Family-owned businesses are too reactive rather than proactive when it comes to risk. They delay investing in changing technology and must deal with family dynamics that can wreak havoc or bring decision-making to a standstill. We have found both to be true. The NWIRC helps family-owned manufacturers navigate their unique issues and roadblocks. Here are some of the common themes:
- Family dynamics can negatively impact the business. Existing family friction, including perceptions of unequal treatment or performance among siblings, can lead to a type of “business divorce” that can be difficult for the family unit to come through intact.
- While a family-owned business offers children greater employment and financial opportunities, the children may not have the ambition or aptitude to lead, may be poorly prepared, or may simply not want to communicate their desire to step outside the business for fear of letting their parents down.
- Creating a position to hire or promote family members who are not the most qualified can create business issues and dissension with employees, customers, bankers and even suppliers which can put the business in jeopardy.
- Owners have invested so much of their life into the business, they often have difficulty turning over the reins to the next generation. Successful long-term planning must include positioning the company to succeed without the owner being at the helm, steering the ship.
These are four complex business issues that many other manufacturers don’t encounter. A fresh set of eyes and objective navigator, can facilitate 1) an open and honest discussion of the business owner’s goals, 2) development of verbal and written agreements to address decision making, and 3) establishing boundaries and policies around business operations, all to guide the business going forward and provide structure to ensure greater family harmony.
If any of these points hit home for your family business, it may be helpful to engage in a discussion with NWIRC to start a plan and navigate a course for success.
Susan Hileman is a Strategic Business Advisor at NWIRC. She is a Galliard trained Family Business Advisor, an Innovation Engineering Green Belt, and has degrees in Business Management and Speech Communications from Clarion University.