Family-owned businesses comprise a huge portion of the U.S. corporate landscape, much as they do in the rest of the world. By some estimates, organizations owned and operated by members of the same family account for at least 70 percent of the world's gross domestic product. In the U.S., they employ as much as 63 percent of the nation's workforce, and along with small businesses in general, account for 78 percent of new hiring activity each year.
"Although family-owned businesses are numerous, they tend to be plagued by similar problems."
Family-owned establishments are all around us, making it hard to believe that they could face challenges unique among the rest of the business community. Indeed, the dynamic of the typical family-run organization is usually much different from that of a comparable business that doesn't share biological ties. In managing the day-to-day operations, communication and almost every other aspect of a company, family owners need to be aware of how to leverage these unique characteristics into strengths, rather than allow them to grow and become a burden.
Threats to family firms
It's easy to see why the biggest problems that most often crop up in a family-run firm are familiar in any business – lack of communication, poor management and difficulty planning for the future. Of course, it's obvious that family squabbles can follow a company from home and into the office.
What too many forget, as noted in an article for The Balance, is that business matters and personal issues are nearly always inseparable in a family business, no matter how hard we try to compartmentalize. This simple fact often leads to cloudier judgment and worse outcomes from decision making than would otherwise be seen in a non-family company.
"Less than one-third of family firms in the U.S. survive the transition between owners after the death of a founder."
Another significant factor in family business conflict is something few of us think about until its too late: a succession plan. One study published by the U.S. Small Business Administration estimated that less than one third of family-owned businesses survive the transition from the first generation owners to the second. This common outcome is a product of many factors, including tense emotions that can surround the transfer of power and the fact that the younger generations might simply not want to continue on. But in any of these cases, the lack of a realistic, well-designed succession plan is the key.
Many of these significant challenges in family-owned companies are a product of a shortage of time and funds. When the finances and account of the business is performed by a family member, new problems often arise too late: inconsistent recordkeeping, nonstandard reporting and general disorganization are a hallmark of long-running family firms. That leaves a serious liability not only for the incoming finance head, but for the business as a whole, one that can easily wreck the entire organization. These problems are only compounded when leaders of the organization aren't able to communicate effectively with one another. That's not always due to personal failings – it could easily come about when family members and other associates are difficult to reach while traveling or working remotely, two problems that can be mitigated with a comprehensive unified communications platform.
When silos make sense
As partner at a business advisory firm specializing in family establishments, Josh Baron may well have seen it all. But something he claims he might see far too much is a key factor distinguishing great family-run organizations from the doomed. Too many family firms fail because they aren't able to develop a healthy balance between their work and their family lives – Baron wrote that in most cases, the eldest generation offers an ultimatum to the younger before passing the baton: They must be either "all in" or "all out," with no third way in between.
Baron goes onto explain that the family firms with the healthiest professional relationships between colleagues are those that can not only set boundaries between work and life, but have the systems and support in place to maintain and at times work between those boundaries.
For example, a critical piece of advice explained by Baron is the necessity of silos within the family workplace.
"Very often silos are disparaged as poor management practice," Baron wrote in an article for the Harvard Business Review. "Indeed, they can cause problems when it comes to succession or when boundaries cut across customer needs or reduce operational efficiencies. But the vast majority of successful family businesses establish silos with clear roles: 'I'm the Head of Retail, you're the Head of the Textile Division.'"
Silos make sense when used as a tool to encourage growth, rather than act as a barrier to it. The best companies of any kind are those that collaborate frequently yet create a few walls when it makes sense. But this balancing act is really only possible with powerful tools and data systems that keep everyone (who needs to be) on the same page at all times, regardless of their department or personal relationship.
Services like unified communications are becoming standard in both small family firms and large multinationals alike. They give executives access to the information they need now from other business partners, freeing them to make better decisions quickly and give them ready access to team members and information that stretches across departmental lines. That's what makes unified communications a valuable part of any company's arsenal, even though it might just make room for more quality family time – in whatever form that takes.