3 Common Family Business Problems and How You Can Solve Them

By August 17, 2017 March 22nd, 2024 Building a Better Team

Last Updated on March 22, 2024 by Dave Schoenbeck

You don’t have to watch reality TV to know that running a family business and working with those closest to you can be both a blessing and a curse. While being so close to your loved ones can be enormously rewarding, it can also lead to stress within the group and, sometimes, irreparable damage.Two family members are shoulder to shoulder with folded arms, looking away from each other, depicting family business problems.

If you’re running a family business, chances are you’ve run into snags with your staff members—namely, your family members. Knowing how to navigate those waters can be tricky, and ensuring that everyone comes out on the other side without hurting feelings takes a special touch.

Below, I’ve outlined 3 common family business problems and how best to handle them.

Top Family Business Problems #1: Communication from the leader often needs to be clarified.

All successful businesses require a strong and competent leader. They’re bound to fail without a good leader, regardless of whether the family is involved.

One of the most common family business problems is a lack of precise planning, which can be toxic to the growth and prosperity of the business. Regardless of who the leader is, that person needs to communicate often and clearly with the family members involved in helping make decisions and those who are “on the ground” about enacting the changes that are decided upon.

How to Solve It:

According to Dr. John A. Davis, a leading family wealth and business expert and respected Harvard University lecturer, it’s vital for a family business to be well governed:

“Governance provides a broad sense of purpose or mission for the group and gives the group a sense of stability. Without stability, we cannot plan long-term. Family business systems have an enduring advantage over all other kinds of enterprise in large part because of their long-term goals, plans, and commitments. Without stability, you lose your built-in advantage. Without adequate governance, you don’t have adequate stability. The family business system absolutely must be governed, and governed well, for success.” –Dr. John A. Davis

The business may not be a municipality, but it should be run like one. Proper business governance ensures that problems are identified and solved, plans are made for the future, and that unity prevails. With governance, trust grows, and discipline is inherent. It means that everyone has a voice and an opportunity to participate in different aspects of the business.

Top Family Business Problems #2: Responsibilities and roles between family members need to be clarified.

Everyone likes to know what’s expected of them. This is true in any relationship – we hear it in marriage vows between two partners committing to sharing their lives; we see it in solid business relationships; we practice it in our friendships.

So why are roles and responsibilities sometimes not clearly outlined or assigned in family businesses? Family business coach Pete Walsh states, “Many family businesses avoid clearly outlining roles and responsibilities because they somehow feel greater clarity and responsibilities might lead to greater accountability, which could lead to difficult conversations about performance.”

How to Solve It:

Performance-based conversations can be awkward, but they’re crucial to the health of your business. Failing to consciously hold these discussions will quickly lead your family business down the path of ruin.

To combat this common family business problem, meet with your entire staff periodically—no less than twice a year—to discuss business goals and plans. Ask the collective group to participate and share their thoughts and suggestions for improvements.

Please sit down with each member and discuss their roles, responsibilities, and goals within the family business. This is a great way to ensure everyone feels valued and their voice is heard. Please ensure that a strong sense of accountability is present so that once the lines are drawn, everyone knows how to drive within them.

Top Family Business Problems #3: Family issues seep into business.

This is one of the all-too-common family business problems, and unfortunately, it’s so easy for it to happen within a family-run enterprise. Just as “drama” is wont to creep into close-knit business relationships, family businesses seem much more prone to this kind of trouble.

Whether due to disagreements about the company’s future, significant changes to internal policies or external product and service offerings, or difficulty influencing a family member, things can get sticky, and fights can break out. Ensuring that everyone stays happy and that things don’t get ugly can be a job all on its own.

How to Solve It:

Family drama can come from several different sources, requiring a different kind of finesse. Longtime entrepreneur and business consultant George Isaac suggests, like Dr. Davis, establishing a governing arm and including a board of directors or advisors (one or a few, depending on the business size) comprised of non-family members. Often, it’s better to have an objective view from someone (like your favorite business coach) whose underlying family dynamics won’t sway.

Isaac also suggests having specific policies and processes for dealing with family issues inside and outside work. Often, home disputes don’t get left at the door and can wedge their way into the workday. It’s important to acknowledge this and approach each issue with an understanding of this fact.

Running a family business is a great way to bring your loved ones closer and create a lasting legacy. Despite these common problems, including everyone who wants to participate and work toward a common goal is possible.

By ensuring you communicate effectively, are open to discussion, are upfront about roles and responsibilities, and actively manage family challenges on and off the clock, you can surely lead a winning venture that you can pass on to future generations.

See also: 3 Additional Family Business Problems and How You Can Solve Them.

Please fill out my contact form if you’d like to learn how to align your family member partners better and resolve your family business problems. Then, let’s schedule a complimentary video coaching session.

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