3 Secrets to Family Business Success

By Rachel Owens and Bill Sornstein Features WomenEntrepreneur.com

The greatest thing in this world is not so much where we are, but in what direction we are moving.
-- Oliver Wendell Holmes

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As your family business grows, the decisions get more difficult. Do you need outside expertise? Is everyone committed to the same vision and goals? Are the right people in the right positions?

In Part I,"How to Keep a Family Business Humming," we focused on how to manage risk and family employees. In Part II, we'll focus on how to move the business forward.

As long as everyone is committed to the same course of action, you'll be able to take advantage of the opportunities sure to emerge as the economy recovers.


Their construction business had been very successful, and the brothers decided to step back from the day-to-day management duties. They reconstituted their board of directors with several outside members who had financial and operating expertise. During the first year of the new board, they said the board members saved them more than $1 million.

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Family businesses need expertise in many different areas, including finance, marketing, operations, sales and technology. Enough of this expertise may exist within the family to get the business off the ground. However, as the size of the business increases, so does the level of expertise needed. This causes many businesses to plateau at the level of their internal expertise.

To survive and grow beyond this point, family businesses have to find the expertise they need at a price they can afford. A wealth of experienced, talented individuals have built their own companies. Many of them are willing and eager to serve on the boards of small and midsize businesses as a way to give back to the community.

Outside board members also bring fresh perspectives and new ideas. They inject objectivity and professionalism into the process. They help balance the innovation and passion of the family business with proven business expertise.

The '3 C's'

Their small hotel chain was owned through a network of limited partnerships with a large number of family and friends. Over the years, communication broke down and factions developed within the partnerships. Ultimately, their lack of ability to work together doomed the business to failure. The financial downturn was the final straw.

Our 3 C's are clarity, communication and collaboration. These people skills are critical to the survival of family businesses today.

Clarity is precise, concise and unambiguous. It means having straightforward objectives that you measure, track and manage. There is no room in this economic environment for wasted effort. Clarity is the first step toward producing results.

Having a clear objective does you no good if your key people are not aware of it. Clear, clean communication lets everyone know what you are trying to accomplish. Share your vision, goals and ideas. Open a dialogue with key employees, vendors and customers. Communication is more about listening than talking. This is one place where social media fits into the plans of any business. It's a great way to create a two-way conversation with your target market.

Good communication leads to better collaboration. While it's important for the "head honcho" to set a clear course, everyone needs to be rowing in the same direction, or you will simply go in circles. Collaboration makes the most of your team's talents; this holds true for both family and nonfamily team employees. People work better when they feel they are part of the process and that their input is valued.

When Things Go Wrong

John, the eldest son, had been chosen as the successor to the family's successful machine shop. As he started to take on more responsibilities, however, his harsh management style put him in frequent conflict with the company's other longtime employees. He also ran into problems when dealing with some of the company's larger clients. After a while, it was apparent that he had to go.

Like most traffic accidents, business failures are typically the result of human error. Having the right personnel and aligning their efforts toward a common goal lead to success. The wrong person in the wrong position tends to send the business vehicle careening off in the wrong direction. In spite of the company's and the employee's best efforts, sometimes things just don't work out.

Firing an employee is one of the hardest things for most business owners. It is also one of the best things you can do for both the business and the employee who is not working out. Nobody likes working in a position in which he or she is not effective. If you create clear guidelines for what success looks like in a given position, then it will be obvious to everyone involved when someone is not meeting expectations.

Having clear policies and expectations is even more important when the employee you need to fire is a family member. Now you have the added stress of creating a rift within the family. However, it is sometimes the best solution for everyone involved. So what to do?

Start by having a "family huddle." This family crisis is akin to an illness in the family. The family can be the support system that helps the family member get through a tough situation. Many times the problem is simply a mismatch between the skills, temperament and experience of the family employee and the job. So engage the family network to find a position that is more suitable for this individual.

When Things Go Right

In-N-Out Burger started in 1948 and has grown to be one of the most successful family-owned food chains in the country. It survived a plane crash in 1993 that killed much of the management team. This included the son of the founders, who had been the president for 17 years. He was only 41. Today, the granddaughter of the founders is running the company.

When things go right in a family business, dreams really do come true. You can create:

    •A legacy in the community

    •An economic engine that can benefit the family through many generations

    •A base for innovation and expansion that will benefit the world at large

By managing your business risks, bringing in the right expertise and enhancing your people skills, you can turn those dreams into reality -- even in tough economic times.

Bill Sornstein and Rachel Owens are principals inSuccession Strategies Inc. They help family-owned and closely held businesses survive and thrive across several generations. Clickhere to access the free Family Business Self Assessment tool. 

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