January 29, 2020
Many family businesses take on the distinctive identity, focus, and idiosyncrasies of the family leaders who run them. These norms can be motivating and can create a sense of common purpose. But they can also make non-family employees feel like they’re missing out on the skills training and career development typically found in more corporate environments. They may suffer from the lack of structure, potential favoritism, and emotional interpersonal dynamics that reflect the preferences and behaviors of the family.
Most family businesses “become more professional” by the third generation, but skilled, solid employees may decide that they’d rather work somewhere that’s more structured, fair, and professional in the meantime. How can the business keep the benefits of a family operationwhile accelerating the professionalization that will be attractive to both family and non-family members? These six approaches can help:
Make it meaningful to work at your company. When the family’s vision, values, and goals are well communicated and accompanied by a clear operating or business philosophy, employees feel they understand why they’re there and where they fit in the grand scheme. One of my multi-generational family business clients puts significant effort into naming and updating their vision for the business, and tying various sales, marketing, manufacturing, and supply-chain activities to the philosophical content. They hold periodic reviews of company values with input from all employees. Many of their employees specifically reference those values and philosophy when they talk about why they choose to stay and work there.
Put time and effort into thoughtful coordination of workflow priorities. At another multi-generational business, the current primary owners texted employees at all hours, telling them what needed to be done and sometimes positioning extra duties as “favors.” Even dedicated employees grew resentful and complained about burnout, because they couldn’t manage their own time and had no sense of autonomy. Some of the best workers started leaving when they got too fed up after repeatedly putting aside critical tasks for ones the owners described as urgent, although the critical tasks had to be completed as well. Even a commitment to rudimentary weekly staff meetings or daily stand-ups would begin reducing the constant stream of changes.
Draft policies and procedural guidelines. Often, family businesses don’t formalize work processes or rules, because family members like to keep personal control and flexibility. I had a client CEO who would actually say, “Fire! Aim! Ready!” and make decisions that should have been made at a lower level. He feared that if policies and procedures were codified, employees would behave automatically and inflexibly. But the lack of formal guidance meant that too many decisions had to be escalated to him. Not only did he become a bottleneck, but his decision-making style created many inconsistencies. After calculating some of the concrete costs of this pattern for him, he agreed that we could draft guidelines for his review. We started with customer service policies, which were the easiest to specify, and then documented technical procedures, and eventually moved on to more complex topics such as employee performance.
Establish acceptable ranges of workplace behaviors. Along with devising policies and procedures for work content, holding discussions about “what we do and don’t do here” can help reduce the extremes of privilege that family members sometimes demonstrate. Owner-managers can behave in egotistical ways that feel like abuses of power to non-family employees, in everything from who may bring children or pets to work, to who may dress up or down, and whether there are vastly different standards for attendance and vacation. Another common example is the use of profane or insulting language in every-day conversation, a form of incivility that can have a negative impact on work quality and productivity. It can be very hard for the family to self-police in these matters, and it’s often helpful to have an outside party facilitate the discussions.
Reduce employees’ fear of favoritism. The assumption that family will always show preference for other family members can affect morale and productivity. Even referring to family members by the same names that others use for them, rather than as Mom, Dad, my cousin, etc., will minimize the emphasis on family relationships. As I explained to one company founder, she was simultaneously overemphasizing the family connection and diminishing her son’s credibility when she constantly referred to him as her son. Creating more accountability for both family and non-family members can also assure non-family members that when employees are off track, someone will remind them of where they ought to be. As one mid-level manager asked me during an assessment interview, “How can I tell [the CEO] about his daughter’s behavior when he loves her so much?” If the most senior family members make clear that they can see when family members are off-course, non-family employees will start to be more candid when something is going awry and will be more participative in general.
Set up a board of directors. An advisory or fiduciary board that includes several outside directors can add structure and professionalism to a family culture, because other professionals will have both insight into and oversight of what the executive team says and does. Company leaders can tap these outsiders to gain authoritative input for planning and decision making, as well as to gain access to expanded networks when the company is looking for potential new employees and suppliers. My clients who have boards have found them to be extremely helpful, particularly when the family’s intention is to keep the company private — although a board can also add rigor to the process of preparing for an eventual sale of the company.
Professionalizing the culture doesn’t have to mean getting rid of family members or reducing their impact. It does require making sure that the major relationships and dynamics operate to keep both family and non-family employees comfortable with the business’s values, aware of their job responsibilities, and capable of performing as expected, with room to grow. Adopting these approaches will begin to provide stability without squelching the drive or personalities that often make family businesses so compelling.