DECODING “FAMILY BUSINESS” PRACTICES


Written By:Salman Zafar 





Today's Industry is dominated by Family businesses and among some of them has grown to conglomerate and contributing much in the development and growth of economy. Providing employment opportunity in formal and informal sectors and trying to survive in turbulent recession times. However working in Family owned businesses is challenge for those who are not family members.

Merits

  • Some companies treat their employees as true assets and they treat non family members like family members, provide them growth and opportunity to move forward.
  • It can be less stressful as compared to multinational companies, there are not much layers of approvals, if you need to get approval of project/task or initiative, normally you don’t have to convince a lot of people and you can quickly go to single decision maker.
  • Family runs business have strong control over expenses and even in most turbulent financial downtime they survive.
  • If you are in good books of management, your career will continue to flourish exponentially. You will have access to privileged information and job supporting tools.
  • You can exercise “Referral Power” to its maximum, since you know the board of directors will always be in your support in even worst business scenarios.

SUCCESS INGREDIENTS

Let me start with the following quotation.
Problems occur in those families which do not have a deep respect for the skill of managing - Roberta Fenech
However in many instances, family business owners first try and then quickly reach to conclusion that non family executives may not watch the affairs of businesses as diligently as owners managing the business themselves.
Every Family Business can grow if Improvement in every functional area is done objectively but mostly ignored by family businesses.
  • Do have balanced Trust Behavior: Business Owners need to have a unwavering trust mentality, instead of under-trusting or over-trusting and establishing their favorite’s employees, they need to discourage those employees who have taken position of favorite not on their performance but based on their ability of bringing dishonest manipulative organizational hearsay to owners thus assuming role of “Eyes & Ears” of management.
  • Do have uniform Ethical Policies: They need to implement Standard Ethics Policies and should not forgive the dishonesty and corruption of employees who fortunately are bringing revenues but at same time cutting their own share while companies should promote honest employees who in short run may be under performing but with little support can be more valuable for the company in long run.
  • Do Think HR is more than “Just Hiring”: Companies should understand the Role of HR Department, and should not think HR as only “CV Collectors”. In good organizations HR department apart from hiring , does lot of work like thinking of employees motivation, timely benefits reimbursement, toxic handling, arranging trainings, focusing on individual employees for their performance improvement and thus acting as mediator between directors and employees , with general goal of giving whole company a feeling of TEAM.
  • Fulfill Hiring Promises and avoid unnecessary Interviews: Family companies should avoid giving sham promises at the time of hiring just to attract top talent and after when employee joins, not giving them full promised benefits. Motivation of any new employee is immediately dried when job contract promises are not fulfilled. HR Managers indulging into ailing practice of using interviews as source of gathering market information of company competitors can harm company’s reputation very much. Resume should be pre screened very carefully against each job requirement before actually engaging the candidate for any job role.
  • Focus On Employees Retention: Also instead of hiring, a pressing need is to focus more on employee retention and should also realize that employee who leave company are brand ambassadors within industry and letting every employee go on good terms by giving fair and full commissions, salaries and retirement benefits will be excellent for goodwill of company in longer run.
  • Don’t Stick with wrong Hierarchy Model: Companies should stop believing that only one model like e.g. flat hierarchy is best for them and ultimately they are wasting much of their precious management time in augmenting with lowest level employees. They should give the credit of any organizational achievement to whole team instead of Individual. In today’s competitive times only team wins and not the individuals.
  • Timely Compensation & Rewards: Companies should avoid intentionally delaying reimbursement, salaries, bonuses, commissions. Try to help employees to overcome theirs social & functional weaknesses by arranging mentorship, trainings and development programs.
  • Define Clear Career Paths of Employees : When in interview if asked by candidate about their career path, they pose as if the new candidate will be the CEO within just few years replacing director while on ground reality Business Owners are so afraid to lose their own control of management. Companies should communicate to employees with clear and written career path.
  • Do Evaluate Performance Fairly: Also they should avoid annual increments based on recent judgment of employee, any one time incident happened just before the increment decision days thus effecting on increment unrealistically. Technique like balance score card or other HR performance evaluation tools should be used to avoid unfair treatments.
  • Do Communicate JD Transparently: They should clearly define Job Descriptions, Roles, Authorities, Powers at each level within organization. Also they should bound title of “Manager” with authority and designation title should be as close as possible with job function. Giving different tasks to employee and expecting different outcomes implicitly can bring more confusion.
  • Do use Professional Language: Also most importantly, “Professional Language” is something which gives a very good impression about your image to employees, customers and other stake holders. Using wrong words, shouting badly, not giving due respect to employees and other stake holders, being nice with your favorites only should be avoided at all cost.
  • Do Recognize and Respect Employees: Recognition and respect is very important for employees, just by saying “well done” will not cost companies but can motivate employees very much. “Colleagueality” is the feeling that one is trusted, heard, appreciated, listened to, and is the contributing member of business.
  • Do Motivate Employees & Teamwork: Motivated employees are biggest assets of any family owned business, Taking all businesses as Customer Services businesses and all employees as Emissaries, highlights the importance of “Teamwork”. Teamwork in today’s world is pulling and pushing the employee towards corporate goal or individual goals. Rewarding employees based on their one time performance or rewarding junior employee to the level that he/she supervises the senior employees of the company is self destructive management style which family owned business owners ignore.
  • Improve Working Relations: If you don’t know how to keep working relationship with your non family managers, you are for sure going to fail in shorter run as well. Almost all the businesses are suffering from this problem of employing outside and then thinking of whether to transfer knowledge or not. But they don’t realize the employees want to work long term in weak economy, and giving them stock options, or at least including them in critical decision making panel will make them feel empowered.
  • Do Evaluate “My Way” Style: Owners need to avoid being in over-control and not delegating authorities other than family members. Also they need to throw away “MY WAY” of doing work, which at one time might have contributed in taking the company forward but is outdated with changing market needs and time. Also centralized control influenced by tradition only should be re evaluated.
  • Make Logical Decision instead of Emotional: A lot of involvement in day to day functions and keep every functional authority with owners will take company backward, Also decisions should be logical rather than provoked by Emotions ( Fear, Angry, Happy), political diversion, or in other relationship ways.
  • Do Enhance Family Member’s Knowledge: Raise the family members in business in such a way that employees should respect them based on their knowledge, support and wisdom, otherwise “Family Gang” concept turns away good employees.
  • Do Consider “Externality” of your actions: Also understanding the Economics term “Externality”, is key to success. A good or bad experience of a particular employee not only effects on that employee but on the whole organization.
  • Do have Written Policies and SOPs: It is vital to have written Standard Operating Procedures (SOP) and avoid treating every employee differently. Organization’s response to a particular situation should standardize rather than wasting management time on familiar situations every time.
  • Do Behavioral, Operational and Financial Audit Fairly: Try to develop standard “Audit department” and stop forgo the mistakes of favorite employees and always in hunt of finding mistakes of non favorites. Justice system should be standardized despite of employees’ role, designation and authority.
  • Do Discourage Workplace Bullies: The very first step is to get rid of work place bullies and stop treating them as opinion leaders. Also develop an eye to judge the manipulative management reports / information instead of just relying on the person giving that report. Also evaluate how work place bullies are stealing information and knowledge for their own survival and not letting environment of corporate learning and growth to be in place.
  • Develop Management Reporting: Develop top management's aptitude to use technology and formalize the reporting mechanism in the organization; don’t be dependent on employees for your reporting needs.
  • Invest on Organizational Excellence: Don’t treat investment on Organizational Excellence projects as biggest expenditure and thus refraining from starting any such initiatives and stick to status quo.
  • Succession Plan, a MUST: Companies should develop a succession plan, don’t just rely on living on day to day basis, and do invest in long term projects. There is going to come a time when someone leaves, retires or passes away, then if none of your family member or manager is prepared to undertake the position then you are for sure setting up your business for failure. According to a research 33% business fail during transition to next generation due to poor planning.
  • Learn Best Industry Practices: Best practices in industry are vital for your business growth, if  companies don’t know how other companies are excelling, may be  narrow vision will not take anywhere. Also understand as what factors can contribute to success of business and what factors cannot.
 A natural argument by Family Business Owners, for all improvement areas in today’s world is that even companies are not following at all as what is written above but still they are financially growing but companies fail to understand their short term growth is derived by luck and not by their efforts of improvements while in the long run companies are digging deep their own grave by not doing investment in employees, systems, operations and most importantly investment in “ORGANIZATIONAL CULTURE”.
By not following basic management principles and by not respecting good managers, family owned businesses are losing grounds and finding it hard to even sustain.
Source:https://www.linkedin.com/pulse/decoding-family-business-practices-salman-zafar

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