5 Rules to Avoid Conflicts in a Family Owned Business

Dealing with employees on a personal level can wreak havoc in a small or family owned business – because conflicts or disagreements are part of many start-ups and family owned businesses.   When it comes to conflicts of interest in a family business,  these matters are more difficult to resolve, because there are three levels of interests namely family issues, business issues, and ownership issues.  A dispute that occurs in one area can quickly cascade into the other areas.

If you are involved in a family business where every day seems like a battlefield, then you should consider outside help as it can destroy family, personal and business relationships forever.  While every business is different, I have put together some general rules for handling employees who are related by blood or marriage.

1.  Don’t put family members on the payroll if they’re not working in the company or canot make a real contribution to the business.  In a start-up or family business, everybody does everything, but you must make sure that everyone has a role and responsibilities that are spelled out and are very clear.  Think very seriously about offering a contract to a supplier who is also a relative = only award contracts based on merit.

2 – Do not create 2 types or classes of employees (family versus. non-family).  No matter how difficult it is do not to show family members special treatment, because in a family-owned business, special privileges given to a family member will demotivate employees and builds up future conflicts.

3 – Communicate honestly and openly with all employees, family or not.  Do not keep it a secret that you have relatives or friends working for you – when it eventually comes out (and it will) you will appear deceitful.  Also, non-family employees shouldn’t feel like family members are more ‘in the know’ about what is happening with the business – effective communication with all members of the organisation is critical.

4 – Do not confuse family decisions and business decisions. For example avoid letting family members borrow company vehicles or allowing them to ask the company’s IT person to set up their home offices.  It is a really bad idea to allow personal expenses (e.g. family trips or holidays) as business expenditures.  The owner manager must keep his business at a professional level at all time.

5 – Establish healthy boundaries between family and business – this especially applies to husband and wife teams.  Agree and stick to some kind of boundary rules, e.g. do not talk about the business after 6pm, at home on the weekends, or during family vacations.  In general, it should be a rule not work with family members on their personal time – keeping the conversation to 5 minutes is OK, but no longer.

Running an owner managed business is very rewarding, especially if you can work closely with family members.  However to ensure conflicts are dealt with professionally and quickly you may need an impartial and objective viewpoint from an experienced business adviser.

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