Many family businesses don’t survive into the next generation. Learn how to recognize family-owned business problems and issues, and how to prevent them.

When running a family-owned business, it’s easy to let things fall off the radar. You can become so focused on addressing today’s problems that you have little bandwidth to think about tomorrow.

However, if you don’t take the time to establish clear roles, policies and procedures for your business and its employees, you risk building a house without a solid foundation.

The truth is many family businesses don’t survive into the next generation. If you want to give yours the competitive edge, then it’s time to focus on your people plan.

Here are some tips to help get your HR house in order.

Have a mission, vision and values statement

Start here to lay the foundation of your business and nip potential family-owned business problems in the bud. Any decision about the future of the business should be matched to these tenets, which are the benchmarks to which each process, goal or outcome should be aligned.

A mission, vision and values statement will establish:

  • How and with whom you do business
  • How your team treats each other
  • What your culture is
  • What seek to promote and protect

When you skip the process of developing mission, vision and values statements, employees won’t know the direction of the business. This can affect productivity. The lack of direction can also lead to morale problems and lack of employee engagement.

And don’t think that because your business is mostly comprised of family members that they know its direction, goals and values.

If you have already created a mission statement, ask yourself, “But is it a living document?” You need to make it a central part of your business. Share it with your employees and expect that they know what your business stands for.

Check your employee handbook

If you have a handbook, make sure it’s updated annually. If you don’t have one – get one.

An employee handbook gives your business structure and outlines processes that everyone is accountable. Whether it’s your brother who has helped you since the beginning or your newest non-family-member employee, everyone should know your mission statement and keep it top of mind. Doing so may help you sidestep common family-owned business problems caused by unclear expectations or processes.

Your handbook policies may include:

  • Payroll and compensation
  • Time off and overtime
  • Industry regulations
  • Employee conduct
  • Communication and computer use
  • Performance appraisals
  • Hiring practices

Some family businesses take pride in not having structure. “This is how we do it, and we’ve never been sued,” they say.

What they don’t know is that sentence should be, “We’ve never been sued, yet.”

There’s a difference between having structure and a casual company culture.

A casual atmosphere doesn’t give Uncle Joe permission to speak inappropriately to the new delivery driver. Just because Joe is family doesn’t mean he can’t get you and your business in trouble legally.

Remember: Your business is not the family dinner table. Business is business, personal is personal. Each family member needs to know that.

The way you talk to each other in a meeting should not resemble how you do so at the dinner table. Don’t assume that you or family members will be forgiven for professional improprieties just because they’re family.

Employee policies and procedures are a necessity. One of the biggest challenges and priorities of a business owner is making sure you’re compliant with laws and regulations. A handbook can help reduce your risk of violating labor laws and running into common HR problems.

Hire the best person for the job

Sure, it’s a family business. And, you couldn’t have done it without them in the beginning. As your business grows, however, you may want to consider more carefully who you’re hiring and why – not to mention what they can bring to the table.

You should be able to justify hiring a family member or friend purely on qualifications. Ask yourself, “How is this person going to move my business forward?”

If the family member isn’t the best fit – choose the one who is.

Conduct performance reviews

If you don’t have a system for evaluating performance, employees have no idea how they’re doing.

If they don’t know their place in the business and how their jobs relate to the bigger picture, there may be morale problems, productivity issues and potential for disengagement.

Performance reviews show where employees are succeeding, where they need more work and helps them establish goals aligned with their responsibilities, tasks and the mission and values statements.

And, yes, even family members should be evaluated. When family members are also graded on performance, it shows your non-family employees that all are held accountable for goals – no matter who they’re related to. Obviously, this can benefit morale.

Make your records bulletproof

Making sure your HR records are up to date, accessible and accurate will go a long way to help prevent legal and IRS problems, compliance issues and payroll glitches.

So often, family businesses are held together by duct tape – surviving for the week. As a result, compliance issues and records may not be the most important things on your mind.

Having a human resources system that takes care of payroll, IRS reporting and workers’ compensation issues can bring relief from stressful family-owned business problems.

Have a succession plan

There’s an old saying, “The best time to plant a tree was 20 years ago.”

A succession plan will help ensure your tree continues to grow and thrive.

If you don’t have a succession plan, then you’re setting yourself up to be part of the group of family businesses that don’t survive into the next generation. And, as COVID-19 has taught us, it makes sense to have plans in place to ensure business continuity through things like succession planning.

Good news! A succession plan doesn’t have to be an intricate. Here are some things to consider:

  1. What are your goals and objectives? Will you sell the business or pass it to a family member? Ask yourself, “What will this look like when all is said and done?”
  2. If you intend it to go to a family member – does that person want to take it over? The next person in charge should share your passion.
  3. How are disputes settled? Who has decision-making powers? Realize that this may change over time.
  4. Identify roles and responsibilities for family and non-family members.
  5. Create a timeline for when and what happens

Seek HR help when necessary

If the task lies outside your dream for the family business, get someone to help. You don’t have to establish your succession plan, write your mission, vision and values statement, or deal with compliance issues alone.

When you’re spending most of your time on things unrelated to growing your business, you may need outside help for duties such as human resources management and accounting.

Want to know more about how to build your business while avoiding common family-owned business problems? Download our free magazine: The Insperity guide to managing organizational growth.