When you think about your asset mix, you might weigh your stock portfolio and what you hold in bonds or real estate investments. But if you’re involved in a family business, it can be a significant part of your asset mix — not to mention an enterprise that also provides employment to you and other family members.
Running a family business can be incredibly rewarding, but working with loved ones is not always easy. Conflicts can arise when business and personal lives overlap. And passing the business on to the next generation can be particularly challenging.
“In a family business, every decision and policy has to be evaluated based both on how it works for the business and also how it will affect the family dynamic — and that adds an extra dimension,” says Daniel Prebish, Director of Life Event Services for Wells Fargo Advisors.
Here are six steps Prebish suggests you can take to help ensure your family business is positioned to thrive and survive:
1. Put people in jobs based on ability
It’s best to hire when you have a business need for a position, not because a family member needs a job, Prebish says. Then choose the candidate whose talents, not lineage, best fit the job. “The most successful family business owners are very honest about the talents of their family members,” Prebish says. “The oldest child may be a better fit in a sales role or an engineering role rather than CEO. Or maybe a child is better off being an artist or a radiologist not affiliated with the business at all.” Sometimes, recruiting talent from outside the company is the best way to fill a job.
2. Clarify and define job responsibilities
Family firms tend to be more informal than other companies, and that can lead to misunderstandings about expectations. Take the time to write formal job descriptions that detail each employee’s responsibilities and goals, and establish regular reviews. The older generation should also refrain from micromanaging. “Parents tend to constantly second-guess what a child is doing, and then the child never feels like he is actually contributing,” says Jim McKown, High Net Worth Strategist for Wells Fargo Advisors. “You need to think, ‘If they weren’t a family member, how would I be handling this situation?’ And that’s how you should handle it.”
3. Leave work at the office; leave your personal life at home
Try not to talk shop during family gatherings, especially at holidays, weddings, and other special events. And refrain from bringing personal drama into the office. “It’s important to be mindful of what role you’re in at a given moment,” Prebish says. “Can you hold off having the conversation about new product marketing with your wife while you enjoy dinner out together?”