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You are here: Home / Family Owned Business / Common Problems – What’s to Happen All Happened Before

Common Problems – What’s to Happen All Happened Before

February 4, 2014 By HRB Family Business Consulting Leave a Comment

Common Problems – What’s to Happen All Happened Before

‘Winds in the east, mist coming in
Like somethin’ is brewin’ and bout to begin. 
Can’t put me finger on what lies in store.
But I fear what’s to happen all happened before.”

Many issues in small business, family business are common problems and have “all happened before.” One of the biggest challenges of a family business is the issue of entitlement. We have seen it many times. Junior is given the title of vice president without ever paying his dues. Sometimes the abuse, the assumption of privilege is the presumed dispensation from Company rules.

Tom Wolf, Chairman and CEO of the Wolf Organization, a six generation family-owned building materials business based in York, PA, presented how you avoid this entitlement problem.

He suggested that a family business needs to ask these seven central questions:

Family businesses need rules. Those rules need enforcement. Many family firms talk about culture. The culture of entitlement kills. It separates the Team. It has been called the “lucky DNA” club. Entitlement can have detrimental financial effects.

Family businesses need rules. Those rules need enforcement. Many family firms talk about culture. The culture of entitlement kills. It separates the Team. It has been called the “lucky DNA” club. Entitlement can have detrimental financial effects.

1. How do the goals of business ownership and succession fit with other family priorities and goals?
2. What are the current owners’ primary objectives for the family business?
3. How will the current owners objectively qualify prospective successors in the ownership transition process?
4. Who leads the succession process if the acquirers are family members?
5. If the acquirers are family members, who apportions roles, responsibilities, and titles among them?
6. How will communications within the family be managed?
7. How – and over what time frame – will family members be apprised of the rules governing the transfer of business ownership?

Mr. Wolfs great points all focus on succession. Some small firms, family businesses have family members in the business with no claim, ownership or involvement in succession. Some firms share their process to work for the family business. Josh Patrick a family business expert suggested these four rules: 

You must be employed at a company other than the family business and have gotten at least one promotion. If you’re a parent, you absolutely do not want to have an incompetent child join your business. If your child isn’t up to the task of being a contributing employee you don’t want them to hurt the business and more importantly, you don’t want to have to fire them.

Your child needs to have reached a certain level of education successfully. I’m not a huge fan of business schools, but I think education is extremely important. There is a certain amount of discipline that is necessary to be successful at school. Setting a minimum level of performance and education allows you to know your child has enough discipline to hit this goal.

Your child can’t come into the business at any level that is higher than where they are presently working. Many times a child might work someplace else before joining the family business. When they are allowed to join the family business at a much higher job level than one they were doing at their former employer, there often is skill level deficit

It’s important that your children learn how to be a good manager and one of those lessons is that the family business is not a place for easy promotions. Having your children earn the level they work at is very important.

Your child should not directly report to any family member. There should always be a non-family employer who is responsible for supervising the work of a family member. At some point your child might become the CEO of the company, but until that day comes, you should make sure that their direct supervisor is not a family member.

Family businesses need rules. Those rules need enforcement. Many family firms talk about culture. The culture of entitlement kills. It separates the Team. It has been called the “lucky DNA” club. Entitlement can have detrimental financial effects, devastating is the impact on people who systematically lose all ability to do more than the absolute minimum.

But I fear what’s to happen all happened before.”

Filed Under: Family Owned Business, Succession Planning Tagged With: business, family business, Family Firm, Family Owned, The Family Business

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