The Price of Loyalty

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How to grow your family business without leaving behind loyal employees

Change is the only constant in life and in business. In family businesses, however, change often comes slowly. Many family businesses (and family business employees) are resistant to change, and they have a point. “The way it’s always been done” has been working for these companies for decades, why change now? Because change is inevitable, whether companies like it or not. That’s why. Family business, more than corporations, often undergo significant changes quickly—and often with the transition of power from the founder to the next generation. The younger generation, having grown up in a different world than their parents, are often eager to enact sweeping changes the minute they take the reins.

These changes, while in most cases essential to the growth and stability of the business, can leave some employees behind—including family members and others that have been with the company for a very long time and have proven their loyalty. Often in these cases, the job has simply outgrown the employee. But a business is only as good as its people, and it’s not wise to eliminate good people who add value, even if their skills are lagging. So, what is a leader to do? You must ask yourself some hard questions of where you are going as a business.  You need to reassess some key issues and create a proactive plan going forward. Doing this will help you build a better future for your business—and help your loyal employees grow into their positions. 

Moving from a “Family First” business model to a “Family Enterprise” model 

In my work as a family business advisor, guiding a transition to the next generation often means professionalizing operations and moving from a “Family First” to a “Family Enterprise” model. What does that mean, exactly? Here’s a breakdown explaining the three parts of the well -known industry model:

Business First: Every decision is made according to what is best for the company. Professional business principles govern compensation, hiring and promotion. Business always comes first here. Most major corporations—operate this way.

Family First: The family’s happiness and sense of togetherness should come before everything else.  Family business decisions will favor family equality and unity, even if they come at some expense to the company’s future. The differences in the quality and degree of family members’ contributions to the business will not be fully recognized. In this model, you keep people even if they don’t add value.

Family Enterprise Approach: In this model, companies create a balance between the two first philosophies.  Any decision should balance family satisfaction and the economic health of the business. This is my preferred approach, but it does require long term commitment to the business and most importantly—comprise and a willingness to resolve conflicts.

I like to tell my clients to create an atmosphere where the business is run like a business—but feels like a family. To accomplish this, you must pave thew new way forward. Take the time to revisit and identify your business philosophy, vision, and organizational core focus. Define your cultural values and ask some questions about the challenges you face as a business. Doing this with honesty and authenticity will give you a roadmap and give you clarity. And it will show you who fits in—and how to ensure that valued employees continue to add value.

Start by creating a Family Vision Statement (or revising an existing one). As described by Aronoff and Ward, in their book, “Family Business Values. How to Assure a Legacy of Continuity and Success” this document is an attempt to describe a desired future state for the family and its relationship to the business.  It usually stipulates a time frame and includes a vivid description of the positive outcomes the family sees. The family business philosophy (Family Enterprise model) and core values both shape the development of the family’s vision. A family vision statement should consider the following:

  • Based on the family’s core values, is it meaningful and compelling?
  • Does it represent the family’s collective commitment to one another?
  • Does it force the family to develop a future focus or direction?
  • Does it encourage actions and thinking that optimize business resources and opportunities?

When you’ve answered the questions above, use them to create a vision that includes:

  • What will be the family’s strengths?
  • How will the family contribute to the business?
  • What will be the family legacy?
  • What will the business provide the family?
  • Who will own the business?

If you can identify the above, you will be able to create a clear Family Vision Statement that will guide your family and your business into the future—without leaving family members and other loyal employees behind. Be authentic and be willing to compromise. If you do, you can balance family and business within your family business.

Contact us today to learn more about our family business consulting services and ensure a successful future.

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