Just as there are unique problems in publicly held firms, there are similar challenges in family-owned-and-operated businesses.
All companies have strengths, but the secret to profitability and perpetuation is a willingness to deal with each business and family issue in a professional manner.
Here are the top three “deadly sins” that afflict family businesses. Perhaps you have not yet been exposed to them. No matter how bad business problems sometimes seem, it’s rarely too late for a full recovery.
Deadly sin No. 1:“Daddy” dominance. In most family businesses, there’s an actively involved “daddy.” Sometimes he’s first generation owner, but he could also be second, third or sometimes fourth. “Daddy” is often highly reluctant to let go of the reins.
Oftentimes, the “kids” are all too frequently little more than “hired hands,” because only “Daddy” is qualified to make the important decisions. And although some of these “kids” are well into their 40s or 50s, to “Daddy” they are - and will perhaps always be - “kids.
Solution:The father - the patriarch of the family - can never be assured that either the business will survive him or his offspring will survive him in management unless he systematically gives up his “important” jobs and delegates them to a qualified subordinate.
Granted, “Daddy” may perform these duties better than anyone else, but no one will ever approach his level of expertise unless he gives them a chance. And to do that, he must allow someone else to occasionally make a mistake or two. He must be willing to make the transition from player to coach.
It doesn’t really matter where he begins in this process, but the point is that he must begin to delegate key projects or duties. It can be preparing the company’s annual budget or profit plan, making credit decisions, assuming responsibility for banking relations, participating in purchasing decisions, pricing, hiring or managing sales. But well before “Daddy” plans to retire, a competent successor must have proven that he or she can perform each of these functions.
Deadly sin No. 2:Refusing to set a retirement date. If “Daddy” or whoever is the CEO of the family business strongly resists establishing a retirement date, the likelihood increases that he or she never will. He will die with his “boots” on. He will have convinced everyone in the company that he simply cannot bear the thought of retiring because sitting at the helm of the family business has been his life and his identify for so many years.
Any owner/manager who is age 55 or older should set a retirement date as soon as possible. And those younger than 55 should also set a retirement date if they plan to retire before reaching 65.
Of course, setting a retirement date is not sufficient by itself. The CEO must take enough proactive steps so that it’s clear to all concerned that management changes are eminent, although not immediate.
There are several reasons for this recommendation. Employees deserve to know what’s beyond the horizon for them. Just about all employees suffer some degree of fear down deep inside that when the “old man” dies the business will fail. And it’s difficult to recruit top talent into a company that doesn’t have a succession plan in place.
Solution:Set a retirement date and name a successor. In the absence of both, there will always be doubt that the CEO is serious about retiring.
By naming a successor, a lot of apprehension is lifted. Both family members and nonfamily members will at least realize that there is a good possibility that the business will survive the current CEO.