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Five Leadership Lessons for Family Businesses

Managing your workforce can be especially tricky when business is a family affair.

Family businesses are the backbone of America. More than 80 percent of all businesses in North America are family-owned, and we’re not talking just mom-and-pop stores or smallish ventures with a few employees. Among companies listed on Standard & Poor’s 500 Index, about a third are family businesses. 

Key Takeaways
  • Articulate and reinforce the principles and values that the family has established.

  • Clearly define roles based on individual’s strengths and stick with them.

  • Earn leadership credibility by having family members “pay their dues” by serving in less desirable positions before ascending to leadership roles.

  • Encourage young family members to engage in external experiences and be willing to innovate from within.

For these entrepreneurial enterprises, the journey to success can be treacherous and survival depends on who’s at the helm. Here are five ways to keep a family business on course:

1. Reinforce your principles.

“Bring together the family and top non-family executives on a routine basis (at least several times per year), so that you maintain the principles and values that the family has established,” says Michael Roberto, a management professor at Bryant University in Smithfield, R.I. “Moreover, executives need to understand the goals and interests of the family owners.”

“Many family businesses struggle with managing the dynamics of working so closely—the butting heads syndrome.”
2. Have clearly defined roles.

Many family businesses struggle with managing the dynamics of working so closely — the "butting heads syndrome,” say Ralph and Connie Accardo, founders of a family-owned, 25-year-old payroll firm in Long Island, New York. “It’s important to establish clearly defined roles based on each individual’s strengths and stick with them — no second-guessing or micro-managing,” the Accardos advise. For example, they decided that Connie would handle the behind-the-scenes operations, while Ralph would maintain the company "face" for sales and customer meetings.

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3. Make family members pay their dues.

The credibility of leadership is critical in any enterprise, but the family business offers unique challenges in maintaining that credibility. “It is natural for owners of family businesses to want to groom the next generation for succession; non-family members generally understand that,” says Marie Peeler, founder of Peeler Associates in Pembroke, Mass., an executive coaching and leadership development firm. “But resentments can brew when family members assume positions within the company that they may not yet be ready for, especially if there are non-family contenders for those same positions.” It is wise, she says, for family members to “pay their dues” by serving in less desirable positions before ascending to leadership roles. Another tip: Family members should make allies of those non-family members who are key workers and leaders in the operation. “The experience gained and relationships cultivated will be especially beneficial as they seek to take on more responsibility within the business,” says Peeler.

4. Expand your horizons.

“Give young family members an opportunity to engage in outside experiences,” Roberto says. “They need to attend executive education programs, attend conferences, and perhaps even work at other firms for awhile. To remain competitive, “they need a broader perspective — get a chance to see how things are done at other companies, not just within their family enterprise.”

5. Innovate from within.

Family businesses, like all organizations, can get into a rut. Mike Abt, who’s been working at his third generation, family-owned electronics business in Gleview, Ill. for over 35 years, says there are times for out-of-the-box thinking and to break free from staid models. “Don’t be scared to try new things,” he recommends. “Make mistakes and move on.”

For any enterprise, innovation, doesn’t have to be a big, expensive project. Rather, it can be anything that is challenging and changing the status quo, whether that’s reengineering an established process or using technology to interact with customers and suppliers in a new way.

Joe Mullich is an award-winning business journalist whose work has appeared in Harvard Business Review, BusinessWeek, Workforce Management, Information Week, Datamation, CIO, Los Angeles Times, Time, the Wall Street Journal and other national publications.