Four Issues with Running a Family-Owned Business
There is probably no other family-run business as well known as Carlo’s Bakery, Home of the Cake Boss. Most family-operated businesses will never reach the level that Buddy and the Valastro family has attained, but that is alright. The extra attention the family faces from their popularity and worldwide audience can put additional pressure on the family. In a small business owned and run by members of a family, there is already enough pressure, the added attention could be crippling to some.
A family business has all of the headaches of any small company. It also comes with pains that only a business ran by members of the same family experience. The family will have to work through these issues, most often making the decisions together, if they are to survive in a fierce marketplace.
Hierarchical Structure
When a family business opens (learn how to start your own LLC here), it needs to establish a management structure. This way all family members know what role they play in the organization, and know where they stand in the decision-making processes.
If this is not established early on, then the business could face some serious problems. Fighting between family members could cause a rift that cripples the business and could ruin the relationships between members. By setting up a structure, responsibilities are clearly laid out and strains within the business and the family are reduced.
In the case of Carlo’s Bakery, Buddy actually had to fire one of his sisters. As the established head of the business, it was a decision he was permitted to make. A difficult decision the entire family had to deal with, but one that had to be made at the time. If his role had not been defined, then the situation could have escalated without any resolution.
Structure Succession
Any good business needs to have a succession plan in place. In corporate organizations, these can be a list of individuals who show promise and would benefit the company if they were promoted to a higher position. In small businesses, this can be limited because of the company’s size and fewer employees. In a family business, one of the family will have to take over a position should something unfortunate befall the family member in that position.
Unless they are able to reach a fair size, hiring from outside the family would be restricted. The family shares the profits from the business and probably would not be able to bring an outsider onboard to fill the empty position. That is why, along with establishing a hierarchical structure, it is necessary to have a succession plan in place. Even though the family is limited in choices, it is a necessary part of the business.
Hiring Relatives
Most companies, whether a small business or a larger corporation, discourage the practice of hiring family members to fill positions. Nepotism can give an unfair advantage to family members who are less qualified than someone who may have been with the company for years, or someone who has gone to college and gone through training to fill that position.
Family businesses are faced with the opposite. They are encouraged to hire family. Sometimes this is not the best option for the business. They may not be qualified for the position being filled. Pressure from other relatives may be intense and may cause a divide if the family member responsible for hiring does not hire the one in question. If possible, push the family member to pursue higher education to use the talents they have that could benefit the family business in the future.
The Cake Boss hires family members, blood relatives and those married into the family. He does so only because they are capable of fulfilling the need of the business. If the cousin or nephew is not qualified, he does not hire them. He is putting the needs of the business first.
Struggling Staffing
If a family-owned business is capable of hiring employees who are not related, then they could be faced with the possibility of high turnover. With so many different family members in the workplace, each giving orders or describing the way a task should be carried out, it is no wonder why so many people leave these types of employment.
This is another reason to have the hierarchy in place. An employee does not want to receive conflicting information from 10 different supervisors. By having a firm structure in place, each family member will know who they are responsible for supervising. More importantly, the employees will know who to listen to for instructions.
Working in a family-owned business can be difficult with so many relatives involved. Imagine what running one would be like. Sometimes, a family will hire management from outside the family. This could be a huge benefit to the business, especially when that individual is highly qualified to do so and has the experience to back them up. Again, this manager would have to know exactly who to report to in order to manage the business.
