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Family-owned Small Businesses: Improving the Culture

Family-owned Small Businesses

             …. and Organizational Cultures

With small businesses flooding the American landscape, we have lots of family owned and operated small businesses. Whether it’s a business that was started years ago and passed on to the next generation or a start-up that originated in the back garage and has grown to a revenue- maker, there is one common theme: they carry their own unique

Oftentimes family owned and operated businesses start with a very informal structure. It’s quite common. As businesses grow, it is imperative that the structure is transformed into a sustainable one. For instance, the owners of Gap are a married couple who still sustain minority control. Considering the company started in 1969, they’ve clearly identified the importance of sustaining a healthy culture. Sam Walton’s son has taken over control of Walmart. Fourth and fifth generation has control of Ford. Henry Ford’s namesake.

So, we know it works. But how do we create and maintain a healthy culture when we’re dealing with family members? I’ve worked with several clients who are operating a family-owned business and albeit the benefits and rewards of operating a business together, it can create a host of issues that the rest of us might not necessarily contend with.

A Client’s Story

A particular client comes to mind, as a matter of fact. He opted to take over his grandfather’s business and he actually changed career direction to do this. In essence, his background was built off of family exposure, rather than any kind of formal training or education. He didn’t have the luxury of working for a major conglomerate where he acquired loads of industry experience either. This isn’t uncommon, but it can leave business leaders wondering how to realign their strategic presence. He clearly took a risk.

When he came to us for help realigning their strategy, his focus was on creating a new plan to regain a competitive edge in light of the uncertain economy. What became strikingly clear was that this husband and wife duo were facing cultural issues that were impacting their business.

They were facing lack of proper training and basic skill. In an effort to combat economic uncertainty and the risk of their business going down the drain, my client brought in his wife to help. Matched with an informal structure, the culture they had created left a bitter taste in the mouths of their employees. There was an unusually high level of turn-over and upon reviewing their financials, there was a lot of wasted expenses.

In an effort to save the expense of hiring a direct report, this client put his wife in charge. In a construction company, having the boss’s wife do field checks was going over like a lead balloon. No clear training for new hires was leaving them at risk.

Some of the areas noted include:

  • Lack of formal policies and procedures
  • No documented planning and strategy: reactive, rather than proactive
  • Confused, unclear roles: difficulty controlling operations
  • Lack of talent
  • Communication problems

These were just the most obvious. It ran far deeper and that is what was impacting the organization’s culture. They needed to get a grip fast… and they did.

What to Watch For

Watch for similar personal values. This can lead to tunnel vision. It is extremely important to acquire external views to be fully aware of the competition. Separate personal lives from the business. Keep an eye out for interpersonal conflict – it can run deeper than other traditional businesses. Recognize and act on lack of foundational skill. Family members who want to be part of the business aren’t exempt from proper training.

We realigned the basic structure of the business. They realize the importance of a formal structure. Though some businesses operate well under an informal structure, this particular one needed a formal structure to help realign their focus. While the communication part is an area they will need to continue to consciously work on, they now have the tools they need to operate their business. The culture has been altered to focus on what is in the best interest of the company and the employees. They are now retaining better talent than they had when I first came on board.

‘The way we do things around here’ has taken on a new meaning. They are now in a position to take advantage of the benefits of operating a family-owned business. Their business was built on a commitment to the community and now their mission aligns with their strategy. Clear values are evident and with the ability to refocus, what was once a struggle, now has clear boundaries and values that trickle through to front line workers.