Succession Planning – Part 7: Problems in Managing a Family Business

Problems in Managing a Family Business

 Problems in Managing a Family Business are somewhat different from the same problems in a non-family business. When close relatives work together, emotions often interfere with business decisions.

 In some family companies, control of daily operations is a problem. In others, a high turnover rate among non-family members is a problem. In still other companies, growth is a problem because some of the relatives are unwilling to plow profits back into the business.

 When you put up your own money and operate your own business. You prize your independence. “It’s my business,” you tell yourself in good times and in bad times.

 However, “it’s our business,” in a family company. Conflicts sometimes abound because relatives look upon the business from different viewpoints.

 Those relatives who are silent partners, stockholders, and directors see only dollar signs when judging capital expenditures, growth, and other major matters. Relatives who are engaged in daily operations judge major matters from the viewpoint of the production, sales, and personnel necessary to make the company successfully. Obviously, these two viewpoints may conflict in many instances.

 Family members who have no talent for money or business can aggravate this natural conflict. Sometimes they are the weak offspring of the founders of the company-sons and daughters who lack business acumen-and sometimes they are in-laws who must be taken care of regardless of their ability or the company’s needs.

 Basically, the management problems that face the manager of a family-owned business are the same as those that confront the owner-manager of any small company. But the job of the “family manager” is complicated because of the relatives who must be reconciled to the facts of the market place, the business, and the future.

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