Family businesses can be a blessing or a disaster. The root of a well-run family business is treating it like a business, not an extension of the family. Here are ten guidelines that successful family businesses practice.
1. Have the family member work elsewhere first. It is not absolutely necessary that it be with an insurance company or agency, although this would be very helpful. They must prove to themselves, to you and to other employees that they can be successful on their own. It is also much healthier for the business that they come with new ideas and training.
2. Don’t expect more or less from them than you would from any other employee. Family members may try harder or not try at all. They need the motivation of the boss, just like any other employee. Apply all agency rules to family members and strictly adhere to performance reviews and salary administration. Give family members responsibility and authority as they are prepared. Give them enough rope to prove themselves and don’t second-guess their decisions within the parameters of authority you’ve given them. This is difficult to do with any employee and much more problematic with family members, especially children. Avoid both extremes, either giving them too much slack or making them tougher than other employees.
3. Don’t create a job for a family member. Either you have an opening they qualify for, or you don’t. If there isn’t a suitable opening, wait until you need to hire someone and/or have the right qualifications.
4. Keep family and business matters separate. Never discuss family matters in front of other people in the agency. Use the names of family members and try not to call yourself “Dad”, “Mom” or “Junior” during business hours. Do everything you can to downplay the family relationship when you’re around other employees. Don’t talk business at family gatherings, as this can put a strain on personal relationships.
5. Keep the lines of communication open. Inform family members of your perpetuation plans so they know what you expect of them long before they are old enough to join the agency. Don’t expect them to read your mind. Pay attention to any children who may resent all the time spent with the agency instead of them. The passive aggressive behavior of an abandoned child can be very destructive to business. Furthermore, sibling rivalries can also wreak havoc on a successful business. If necessary, heal old wounds with the help of professional advice.
6. Never leave the agency to two people (family members or not) on a 50/50 ownership basis. The dollar always has to stop somewhere. And two siblings may already have some built-in differences of opinion that make decisions more difficult to manage effectively. It may work in some cases, but these are the exceptions. At a minimum, put an outside person on the board as a deciding vote.
7. If possible, develop an organization chart in which family members report to people other than yourself or other family employees. Make sure other employees understand their relationship to family members and to whom they are accountable. Just because someone has the same last name as the owner doesn’t mean he has the same level of authority and everyone should know that. Unclear relationships can cause confusion and dissension and can cost the agency good employees.
8. Create a board of directors that includes non-family members. When you need advice on how to deal with complicated issues, it’s important to have someone involved without emotional family ties. Use outside professionals, such as CPAs, lawyers, or consultants. Also consider joining a brainstorming group of other business owners.
9. Make family members pay for the property, even at a discount. Most people don’t appreciate something they got for free, compared to something they had to earn to get it. The concept is that if they pay for it (or have to sacrifice something for it), they will value it more and do a better job of running the agency. Similarly, children who are not associated with the agency should not be owners, as they may not appreciate what it takes to run the business. Also, be aware of the IRS. You must properly value the property you give to family members whether through gifts or cash transactions.
10. Make sure all participating family members agree to these guidelines. There is no point in having guidelines or rules if no one agrees with them or if the rules are implemented sporadically. All family members must agree to these “rules” for the family business or they cannot be a part of it. This is where tough love comes into play. Children do better when rules are clearly explained and followed consistently. The new company motto should be “it’s nothing personal, it’s just business.”