How to make your family business thrive

There is an old saying that goes, “never work with family”, but with family businesses accounting for two thirds of firms in the UK private sector it looks like many people haven’t taken this advice seriously.

That’s not to say that working with family cannot be extremely frustrating and challenging as well as being very rewarding.

David Lenehan is the sales director of Northern Industrial, an automation repair provider based in the UK. While his brother decided to pursue other career interests, David decided to join his father's business in 2007. Since joining, the company has gone through some major changes; turnover has increased by 400%, staff levels have increased from 9 to 43 and they now export to 126 countries worldwide compared to zero in 2007.

Family businesses are the cornerstone of both British and American business but can present some unique entrepreneurial challenges that can cause major problems to your business and family life. Even Luke Skywalker had problems working with his dad. So if you are in business and thinking of working with relatives, follow these tips to make your family-run business thrive.

Keep it in the office

Keeping work and your personal life separate is extremely difficult since most family run businesses operate on both levels all of the time. “Having a clear work and personal life cut off would be nice but it is almost impossible to have an absolute clear divide” explains Lenehan. “Instead of having a blanket rule we found setting times that were off limit, such as the dinner table, to be more manageable”. This enables everyone involved to get a break from their respective jobs.

Keep it legal

It is fairly common for family businesses to feel that employment contracts are unnecessary for family members. After all why waste time with unnecessary formalities when you have a business to run? Well, firstly it is a legal requirement that all employees to have a contract of employment which defines the particulars of employment including hours of work and holiday entitlement.

“You should treat this like any other business decision and prepare yourself for the future. If Jeremy Kyle has taught me anything it’s that families fall out” explains Lenehan. In the case of a family dispute, the contract will help provide guidance on the appropriate mechanism to deal with such circumstance. This includes having an appropriate notice period in the contract. In the worst case, the family member might leave to join a competitor or set up on their own in competition with the family business. In such circumstances, you will want to prevent them from taking and misusing the business’ confidential information; from competing with the business; from soliciting the customers you have worked hard to obtain; from poaching your other employees; and, in certain businesses, protecting the intellectual property of the business.

Keep it defined

Having defined roles and responsibilities is another key way to ensure resentment does not build up between family members, and also other members of staff in general. If roles and responsibilities are not clearly laid out it makes it difficult to keep things fair, such as pay, and can also lead to an unbalanced workload with one person feeling like they do far more work than another. It can also lead to standing on each other toes.

Having clear roles can sometimes be difficult in the early stages of the business as there will be less members of staff and therefore each person within the business will be picking up varied responsibilities. As you grow, be sure to clearly mark out who does what and that it is fair.

Keep it pro

We are all guilty of talking to our families in not the most pleasant of ways - you can say things to your relatives, especially close ones, that you just couldn’t get away with saying to others. “Just because you are a family member it doesn’t mean that you can say things that you wouldn’t be allowed to say to any other member of staff” says Lenehan. Keep it professional. Not only does it potentially create a volatile and uncomfortable atmosphere for everyone else, it can also make it difficult to enforce boundaries with other members of staff if you are failing to follow them yourself.

Keep it realistic

As the boss’s son or daughter it is difficult not to feel added pressure to perform. “It is easy to get paranoid and feel people think that the only reason you are employed is due to nepotism.” explains Lenehan. In the early days the temptation is to work extra hours or go that extra mile and then some to prove yourself to your colleagues.

Unfortunately by being the office superman you often tread on other peoples toes, cause extra confusion and de-motivate the other staff. As a newcomer to the family business, you should always appreciate what is already there even though you see improvement. No matter how much of an expert you are you still need to make sure that you keep others in the loop and respect their ways of doing things.

Keep it fair

Money is a very sensitive issue in most businesses and even more so in a family business. In 90% of cases it will be the parent who decides the child’s salary and compensation system and it can be difficult to set the remuneration level.

On one side it is easy to take the relationship for granted and assume the family member will be okay with whatever their pay is because “we’re all family”. On the other side, some mix compensation for a job with gifts to a family member. This can result in high salaries which do not reflect the work being carried out. This might be caused by a parent wishing to maintain some basic level parental control through pay or to mitigate parental guilt.

Not only do high wages for family members affect the overall profitability of the business but can also cause negative feelings among other member of staff. Resentment and a “you and them” feeling among other staff can lead to all sorts of problems including poor productivity and high labour turnover. The best method is to pay the market rate to family members based on their experience and ability.

Keep it separateWorking closely with a family member can put a real strain on your relationship. “There were times when I could have killed my Dad” explains Lenehan, “We soon realised that working in the same office, day in and day out was not going to work. We each need some space now and again”. Thankfully there are some easy and effective solutions available. One of the most effective is to simply rearrange the office slightly so family members are out of earshot of each other. Another solution is to work from home one day per week to minimise the interaction time.