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In Part III of this series, we continue our look at some of the major reasons why many family businesses have failed and may fail yet if such issues are not effectively addressed.

I Love You, You're Hired

Many family business owners simply can't help but hire those family members they love best and provide them with the best roles.  In their vision, the ideal reality is a child that takes the helm after them.  Sometimes the owner's children or other close relatives aren't the best candidates.  Sometimes an owner is persuaded to hire a family member for a certain role that would suit the talent and skills of another far better.  It is often difficult for family business leaders to effectively assess the skills of another family member because they are blinded by love and their own desires regarding the business.

 Conflict and Emotion

In non-family business a work conflict remains a work conflict.  In a family business, a conflict that erupts at work goes home and vice versa.  There is a decided emotional vulnerability that is connected with the family business platform.  There is no way to get away from the boss or people at work when you may live with them or are in close proximity to them.  Many people find this constant connection to family members stifling.  Others cannot recognize the need for boundaries--for giving other family members their personal space even though that separate time could be therapeutic.  Work conflicts, in short, are personal conflicts and nearly always emotional, always threatening the foundation of the business.

In Part II of this series, we continue our look at some of the major reasons why many family businesses have failed and may fail yet if such issues are not effectively addressed.

 Lack of Grooming, Lack of Succession

When the head of the business neglects training someone as a replacement or does not effectively consider a succession plan, a level of business chaos can ensue when the business lands in the lap of the second generation and quite frequently by the third.  Sometimes an owner will simply 'groom' the wrong person, a family member not equipped to manage the business or staff well.

Other times the leader is simply too busy to mentor the second generation in a meaningful way.  The longevity of a family business depends upon effective management training.  Ignoring this aspect can result in the business falling into a family member's hands with no adequate experience for holding the reins.

Non-Family Need Not Apply

Sometimes a family business fails by failing to recognize when it needs to bring in outside help to fill some pivotal role.  Of course, even when someone from the outside fills a pivotal role there may be considerable unease among the other family members who did not sanction the decision to hire from the outside.  It often happens that family members of an existing business do not have the skills or talent needed to move the business forward.  In such cases the business can stagnate while its competitors roll more effectively with the changing times.

Next week: I Love You, You’re Hired

Family owned and operated businesses have been part of the American fabric and are certainly a tradition alive and well in many parts of the world.  Knowledge of merchandise or the skills associated with a particular craft are passed from one generation to the next as the elder generation fosters the younger to ensure continuity and success. While all businesses face obstacles, the family-run business is associated with some unique challenges.  According to the Family Firm Institute, in fact, only about a third of family businesses will thrive under the management of the second generation.  The challenges outlined here are among some of the major reasons why many family businesses have failed and may fail yet if such issues are not effectively addressed.

The Unshared Dream

So often the main issue that a family business faces is that the business is not the family's dream at all but, instead, belongs to just one family member.  For that one member, the business is a dream, a lifelong pursuit, and even a passion.  Yet to other family members, the business may merely be a job--and one they may not especially like.  When the founder relies upon others to share a vision and work ethic they do not have, this tends to erupt into problems.  Sometimes this dilemma can be warded off when the main owner allows other family members authentic ownership of their roles.  People tend to care more about their jobs when they feel safe to emotionally invest in their work.  A tendency to micromanage is almost always a surefire way to alienate other family members, to prevent them from feeling like true stakeholders.

 

Next week: Lack of Grooming, Lack of Succession

Every manager has experienced the need to fire an employee, and every business owner has experienced the need to fire a vendor.  Most family owned business owners have experienced the desire to fire a family member, and almost everyone who has dealt with an obnoxious customer has experienced the desire to fire that customer.  Yet so often we don’t follow through on the evidence provided, nor the instinct that tells us that this person can only bring a caustic relationship to our business.  We allow the tension to continue to build, often causing our profits to erode and productivity to be impacted.  When is enough, enough?  When should you fire that customer and how do you accomplish the task – professionally?

Before you make a final decision, let’s look at a few aspects of your business that might provide some additional perspective.  The four “M’s” of parting ways with a customer include:

  • Mindset
  • Mirror
  • Measurement
  • Movement

Mindset is the foundational issue for almost all relationships with people.  No, not their mindset, yours!  Reflect back in your or your company’s relationship with that specific customer.  Have they been treated (serviced) the way you want your company to be known for treating clients?  Were they treated the way you personally would like to be treated?  Has the client’s issues been clearly heard; or does fear get in the way of your ability to listen to meaning of their explanation, not just the words?  Very often it is our mindset, perceiving what the client knows or experiences, which is the actual stumbling block to delivering that WOW service you expound upon.

Mirror implies a reflection, in this case of oneself. Have we trained our employees to provide the best service possible or are they “mirroring” what they see leadership providing? Once our mindset is open to new perspectives, we can take a more honest look at our business.  In many situations, our worst customer can be converted to our best customer just by listening and understanding where the customer is coming from and making a necessary change that can bring satisfaction.  In a family business, we might find ourselves wanting to fire a family member because of what we “perceive” as their inability to work well with us.  Sometimes this leads to our treating a family member with less respect than we do our employees.   However, if we stop and listen to them, understand issues from their perspective, we may find a resolution that will bring a greater buy-in and respect on both sides.

Measurement of the cost for parting ways with a customer has to be considered.  Is it costing more to keep the customer than to recommend they used someone else?  Does the emotion of dealing with the situation impact all aspects of the business because everyone hates coming to work when that family member or customer is around? Caustic people and situations do leave lasting results if not dealt with in a timely and reflective manner.  The outcomes of what to address and how to address issues needs to be weighed and measured. 

Movement, taking the initiative to take action and make something happen is critical.  Once you have checked your mindset and attitude; you have looked at yourself in the mirror and you have moved by making adjustments in the way you manage people in your business; the next step is addressing challenging behaviors.  If you still have the employee who just doesn’t want to change, the vendor that still doesn’t deliver the quality you expect, or maybe the problem customer continues to verbally abuse everyone they come into contact with in your business, then this is time to actually take the final step.  Fire them, do it professionally, but stop procrastinating.  Everyone; employees, family members, and even other customers will thank you for taking action.  Once you’ve followed through, you will wonder why it took so long for you to actually do it in the first place!

Entrepreneurs, business owners, leaders, managers need to step back on a regular basis and get back to basics. The temptation when running your own enterprise is to stop doing the foundational elements that made you successful in your business. What are the basics for you? Could they be?

• Marketing: Testing and measuring what is working in your marketing program and what isn’t. Are you guessing as to which marketing programs work and which don’t. One of my clients swore that one of their marketing programs worked and worked well, until we ran the numbers. They were investing about $14,000 per year in this program and got about $6,000 back. Even taking into account lifetime value of the new customers, it was an expense and not an investment. Both revenue and profitability went up when they stopped that marketing program.

 Sales: It is documented that sales people must be trained and retrained on a regular basis to refine their skills and ensure the basic blocking and tackling is being done. What old sales techniques need to be revisited and are there new ones? Selling today is very different than 5 years ago, however some of the basics like communicating with your prospect are foundations which often get forgotten due to bad habits.

• Closing: Are you asking for the close in the sale? I have a client that lost the potential of a big new account because the prospects perception was that they didn’t want it enough. They asked for the close, but not often enough during the final presentation. Their competition asked for the sale more.

• Advertising: Are you running the same old ad that you always do? It works – great, but could it be better. What is your shock and awe with your advertising? Do you get their attention, or are they yawning through the whole process?

Basics are critical. Innovation is critical, yet if the innovation is built on a rocky foundation the whole business may fail before you know it.

 

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Janna Hoiberg
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