Having a family business can be great, but it can also be very troublesome. Sadly, many family businesses fail, and it’s not always because of greed or bad luck. There are a few reasons why family businesses fail, and these can help you understand why you might be experiencing trouble.
Having a sibling rivalry can destroy your family business. It can result in missed targets and total failure. There are several reasons why this can occur. But the main cause is the difference in personality between siblings.
There are two types of sibling rivalry: emotional and strategic. The emotional rivalry stems from problems with self-esteem and a need for approval and affection from parents. The strategic rivalry is triggered by differences in personality and risk tolerance.
There are a few ways to prevent sibling rivalry from damaging your family business. First, you can reduce the competition among the siblings. You can do this by giving your children a variety of tasks outside the family business. This will help them realize they do not need as much attention from their parents. You can also help them develop problem solving skills and emotional intelligence.
Second, you can teach your children how to negotiate. You can also set up a solid governance structure and encourage them to work toward win-win solutions.
Lack of boundaries
Having a clear line of demarcation between acceptable and unacceptable behavior is a must for any business. However, this may be difficult when family members are involved. Developing policies that define effective boundaries can be a big help to the family business.
One of the main reasons why family businesses fail is because they lack boundaries. Unlike a “mom and pop” shop, a family business requires knowledge, skill, and experience to run successfully.
The same applies to personal and professional boundaries. When family members become business employees, they should have the same standards of professionalism as other employees. If a family member is in charge of a budget, they should keep it separate from their personal finances. However, this doesn’t mean that they should be in charge of the business.
A family business may also fail because of lack of organization and lack of a unified vision. If a family member lacks the knowledge or experience to run the business, they may end up causing conflict and making work unproductive.
Lack of succession planning
Creating a succession plan is the first step to ensuring that your family business isn’t put at risk. A lack of planning is one of the main reasons why family businesses fail.
Creating a succession plan involves four steps. Defining values, identifying roadblocks, defining milestones, and finalizing communication plans.
Defining values involves knowing what you’re trying to achieve. Identifying measurable milestones involves deciding goals for the next 12 months, and developing a plan to achieve these goals. The biggest surprise is that the smallest step involves the most complicated task.
Defining milestones involves setting a retirement date, identifying the skills that you need in your successor, and ensuring that you’re prepared for the transition. The process is similar to a relay race.
The process is also complicated. The best practice involves a children’s program that requires them to earn a university degree, gain relevant professional experience, and compete with nonfamily applicants. It is also a challenge to ensure that you aren’t getting special treatment.
Failure to communicate plans to the younger generation
Developing effective communication within a family business is one of the most important things you can do. It’s not just about getting the older generation on board; it’s about making sure the younger generation is able to understand and support the plans you’ve developed. The best management communication techniques will not work if you aren’t communicating your plans openly and honestly with your family. By doing this, you’ll strengthen the transition process and allow the younger generation to feel more invested in the business.
While it’s important to be honest and open, it’s also important to avoid the temptation to minimize the amount of conflict that arises. Conflict is inevitable, and fearing it can actually prevent you from progressing. In fact, the key to family business success is dealing with conflict when it arises. The best way to deal with conflict is to approach it with the Golden Rule in mind. By doing this, you’ll reduce your assumptions and build trust.