6 Tell-tale Signs You’re Running a Family Business & Tips for Making Them a Success  

Family businesses built America and economies around the globe. They started with mom and pop working their fingers to the bone and expanded bit by bit, eventually adding their children or other family members to the payroll.

A growing numbers of women, discouraged from slamming into glass ceilings, are promoting themselves to the c-suite by starting their own businesses. Naturally, as their companies grow, those same women are hiring family members they trust to fill key roles.

The most successful family businesses understand that to compete in the marketplace, they need to think like a major corporation while also balancing family needs and company goals. Here are 6 signs you might be operating more like a family than a business.

1. Clients Refer to Your Boss as “Your Mom”
You anxiously awaited adulthood, you attended college at an Ivy League school, you got your first job and…clients refer to the boss as, “Your Mom” or “Your Dad.” We get it. You were groomed to work in the family business, so you got your degree, moved back home and jumped right in. Except your parents still treat you as if you don’t know anything and your clients mentioning talking to “your mom” makes you feel like snack time must be right around the corner.

Avoid use of familial terms at the office. As the business owner, you set the stage for employees and customers. If you refer to your daughter as Shelby Lewis, our Business Development Director, without adding “My daughter,” before it, you have established that in the work place, she is an employee like anyone else. If you are the employee/child, cousin, sibling, discuss the subject and refer to each other by name or title at the office, just as you would at any other company.

2. Responsibilities Change Daily
In small or family businesses, people tend to wear a lot of hats. Titles seem gratuitous without clearly defined roles and responsibilities. It makes sense that responsibilities will change as the company grows or that someone will have to fill in or assist someone on a project, but confusion, and sometimes frustration, can result if no one has a written job description.

Define expectation for every employee, family or not. What are their primary duties? To whom do they report? Your tendency as the owner of the company might be to address issues with your family member directly, but maybe you shouldn’t. If they aren’t your direct report, allow their supervisor to do the job. This removes some pressure from the business owner from feeling as if you are being the heavy or letting family members down. And clear definitions ensure you are judging based on the expectation for the position, not the daughter or son that might hold that position.

3. Social Promotion Lives On
If death or disability are the only options that create opportunity for advancement in your company, you probably operate a family business. If promotions do happen, it feels a lot like social promotion in school when that big kid who repeated 5^th grade twice gets promoted to 6^th grade—even if he isn’t qualified–so they can have his seat for another student. As siblings or cousins are ready for employment, your family creates new titles and “promotes” someone so the newbie can have a starter position to fill.

Establish clear pathways to promotion. Where small, and especially family, businesses tend to fail is they do not outline the pathways to success as other companies do. Worse yet, it may appear to employees that are not family members, that there are no opportunities for promotion unless one is a family member.

4. Outsiders Don’t Stay Long
When a family business does hire non-family members, they don’t last long. It could be because there are two categories of employees: family and non-family. If you’ve ever attended a party where you didn’t feel welcome, or walked in on a conversation you weren’t supposed to overhear, you know how “outsiders” feel working in a family business.

The owner sets the standard of behavior; demonstrate appreciation for the contributions of non-family employees by treating everyone in the company with equality and respect. The family might own the business, but every employee’s ideas and input are important to the future growth and prosperity of the company.

Monitor how often and in what detail you discuss non-business issues while at work. Remember how awkward you felt as a teenager when two of your friends discussed the fun they had at the concert over the previous weekend, the concert you weren’t invited to?

5. Company=Family Cash Cow
Don’t treat your business like a bank. Too frequently family businesses worry so much about compensating family members enough to sustain happy family life that they miss out on building a happy, profitable company life. It is unrealistic to support multiple families on a start-up and owners, even if they are building the business as a family legacy, should never feel guilty for making sound financial decisions for the business. Companies must investment in new equipment, R & D, marketing and training as they grow.

Establish a clear growth plan. As the company grows, decisions as to how to grow the business will present themselves. Will the company accept outside capital to grow? If the family does not want outside investors in the company, then there must be a stringent set of rules for reinvestment of profits and limited dividends to shareholders to sustain growth. Under what circumstances can shares in the company be traded?

6. Work and Family Collide
Sure, board meetings can take place over dinner, but if board meetings happen around grandma’s dinner table, you might be allowing business matters and family matters to intertwine too much. Even if all the board members are family members, delineate business and family times. A board meeting is better suited to an office table with fewer non-business distractions than to a dinner table with extended family milling about. And family gatherings are not the appropriate venue to take cousin Sue to task about her latest designs for the company website.

Just as an owner should refrain from discussing family activities on work time, she should also avoid making work decisions during family time.  If your family tends to discuss and “settle” business matters over the weekend while at a family gathering and come to work on Monday to report a decision, employees might assume they have no stake in the process.

Even with the best plans, sometimes rivalries or other disagreements will happen in a family business. To keep them from destroying the company that everyone has worked hard to build, some owners bring in professional outside support for key areas. An accountant or attorney that isn’t a family member can advise as to what is usual and customary in an industry with neutrality that a family member might not be able to muster. Remind yourself, if needed, that other CEOs always consider the next best step for the company. You needn’t feel guilty for protecting and doing what’s best for the business you gave birth to.