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Leadership Lessons For A Great Family Business!

Updated: Dec 9, 2020

A family business presents a unique set of issues and also great opportunities for prolonged success. Having spent 16 years in a family business, 28 years of consulting and 2 ½ years of coaching moderately and largely successful family businesses, I have gained a great deal of perspective on what works and importantly, what has a reasonable chance for failure.

“Family Gravity” drives long-term success Family-owned and controlled businesses represent 80 percent of companies worldwide, but by not retaining their corporate ethos or “family gravity,” or following a disciplined succession process, many underperform or fail to survive according to new joint research from global executive search firm Egon Zehnder and Family Business Network International.

“My problems are unique”

Although many of us think that our problems/issues are unique, there are some cues taken from wildly successful businesses that we can and should follow:

  1. Roles & Responsibilities. By simply creating a position for a newly graduated person or family member, you have the obligation and yes, it is imperative that you treat them fairly by defining their Roles & Responsibilities as you are setting them up for success and they will clearly know what is expected.

  2. Accountability. For many family-based businesses, having a laid-back culture is positive. However, the informal structure and culture found in many businesses can equate to a lack of documentation, policies, and defined strategy and goals. Accountability need not be hard. Think for a moment, you agree with a team member as to what their Roles & Responsibilities and what Key Performance Indicators are (KPI's) and each goes along their merry way. Now, they do an absolutely excellent job and meet all of their KPI's. This is a time to celebrate and congratulate this team member. They deserve it. On the other hand, and equally important, if they fail to meet their KPI's. Typically this can result in the company not meeting targets, customers feeling unappreciated and morale going to a very low level. Underperforming teams miss their KPI's and it is never addressed. It’s about fairness. Although it can be very difficult, having a 1 2 1 with an underperforming team member it is truly about fairness. You can trust that they know that they aren’t performing and perhaps even have a degree of guilt associated with their underperformance. You may determine that this person has not been trained properly; they don’t understand their Roles & Responsibilities or, they are in the “wrong seat on the bus.” A true leader can have a great and positive impact on an individual that is not performing to their expectations and if leadership has failed them, then corrective action can be taken.

  3. Lack of training. The informal culture found in many businesses can result in a lax approach to training new team members, whether they are family members or not. Successful companies have a thoroughly thought out induction and ongoing training program that is executed by the manager of that department. Remember, the business owners may have been the only face to the customer early on but as you grow, others will be carrying out your vision and they need initial and ongoing training that is not an afterthought but rather "this is the way we do business". There are many excellent training resources including LinkedIn Learning and ongoing video and one-day seminars. These can be used to supplement your own internal well-defined program.

  4. “Management by When”. Many family business fail in this one simple leadership concept. They speak to the team member, they agree on the expected outcomes, and then, there is a difference in expectation as to WHEN the result should be done. The manager thinks it should have been done by Friday based upon their view of what is needed. The team member, on the other hand, has many priorities and thinks next Tuesday will be good enough. The manager is frustrated and the team member is unaware (unless they are brought into a 1 2 1). This can be handled easily by making sure you agree on WHAT is to be done and BY WHEN. Once this is agreed, the manager should be able to reasonably expect that the task will be completed by the time agreed.

  5. Boardroom discussions​. Many times, I have come into the boardroom for a scheduled coaching session to have the owners discussing non-performance by a team member and yet, they had not had a discussion with the team member about their non-performance. WHY? There are a number of reasons a)fear of what the team member will say and not being able to have the right answers and b)you will see this team member outside of work and on weekends and you may be embarrassed to face them and their family. My advice is that you really have no right to whine if you are not willing to address the issues of the day and determine corrective action. Successful family businesses are moving onto a more accountable structure because they see in this highly competitive environment everyone needs to be performing at a very high level and if they fall down, they need to take quick and decisive action to rectify the issues.

  6. Lack of input from the team. The days of "management because I said so" might have worked well in the 1950's but they are very outdated in today's environment. Successful family businesses are constantly asking for input from their team. After all, who knows better how things should be done then the people doing it. A best practice we have implemented is to ask each individual to write an email that responds to this statement, "If I were running this company, I would…...". If you can have this sent anonymously - perfect. You will be utterly amazed at the ideas that come out of this exercise and obviously, action needs to be taken on the ideas that are of sound business practice. You can use this as a way to "Rally the Troops" by conveying that you are a company that listens and is interested in the team's input.

  7. Hire the best you can afford. Family members may be trusted more because there is normally a greater stake in the relationship than exists with non-family members. This core value is an example to others outside of the family as one of very strong and true loyalty to principles and family. There is, however, a drawback that needs to be addressed when it comes to making hiring decisions. Although preference may be given for the above reason, you also have to match this with talent and expectations. If your goal is to have the most integrated IT department; the most accurate and timely finance department or the best "hunter" in a new sales territory you need to take a view of hiring the best you can afford. If that is a family member - terrific. If it is a recent graduate and you can mentor them into great results - brilliant. If, on the other hand, you need immediate outstanding results, you should consider who are the best of the people available.

  8. Share the wealth? Rewarding achievement leads to outstanding success It's an age-old psychological axiom that when you reward the behavior and results you aspire to, these behaviors will continue. By having a reward system, based upon the team's results you will encourage teamwork and begin to develop a team that self-manages. I have seen reward systems that are "we had a good year so here is a cheque" or, "here is your year-end bonus." Although these are nice perks, they fail to push the company forward and reward success rather they reward longevity. A better practice is to layout, in advance, the goals you aspire to. It could be breakeven; it could be above last year or it could be a reasonable target. Whatever you choose, you then layout a reward system for the entire team (directors and commissioned people excluded) It is critical that this system is set up based upon the INDIVIDUAL'S responsibilities and performance expectations and not equal nor based upon family or family association. By rewarding achievement and outstanding performance, you will be moving to a high-performance team.

  9. Have regular family business meetings. When you spend countless hours focusing on making your business successful and increasing the value of the enterprise, you may be leaving those that support you either at home or other family members in the business without a clear picture of what is happening. All people and especially family members have a need to know. Best practices are to have regular family meetings to discuss business issues that affect the attendees. This is not a board meeting rather it is a family meeting talking about the business. All parties have a vested interest in the success of the business and although not all work directly for the company, they deserve to be informed.

  10. Create a shared sense of purpose. Remind family members of your company's vision and mission. When family members have a shared set of goals for the business, they'll be more motivated to pull together. Working together for a common goal can help you overcome personal differences. Focus on the ultimate goal of your business—not only to serve your customers but also to create a lasting legacy for future generations.

  11. Plan for the future. Like all entrepreneurs, founders of family businesses are generally passionate about their businesses. Often, they can't imagine life without their work and are reluctant to hand over the reins. However, at some point, everyone needs to step down. Start early to plan for a transition to the next generation. Even if you plan to work until you drop, who knows what circumstances will bring? Make sure you have an exit plan and be able to happily pass on your legacy.

Dave Roby - We Focus On The People, The Rest Will Take Care Of Itself.

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