Managing a Family Business

Business Coach Column by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) from the Manila Bulletin

Not all entrepreneurs start a business. Sometimes circumstances dictate that they take over a family business, hence becoming entrepreneurs by default. The first venture I managed put me in this situation. Being the eldest, after my father had a stroke, I was compelled to manage our small drugstore chain. It was far from my dream business and it was the start of a neophyte’s nightmare.

Managing our business is quite challenging. Just like any other family business, it is full of emotional issues. There are so many role overlaps, because of so many unwritten rules. However, with good communication and respect, conflicts were resolved.

If you were tasked to manage a family business, here are some recommendations that would help smoothen out the transition:

Know what your responsibilities and areas of authority are. I should first have clarified with my parents what I was supposed to do, what I could not do, what kind of decisions I can make on my own, and what I must first refer to them. When I began, I was just dispatched to “manage” the stores. After looking around the store and greeting some of the staff, I sat down in the manager’s chair and wondered what I was going to do. One of the urgent things I wanted to do was to fire a certain staff for lack of cooperation. However, I was not allowed to do so because the person was a trusted favorite of my mother. This undermined my authority and made it much more difficulty to instill discipline.

Learn first who can be your allies. So that you can quickly learn the business and garner support for your plans, you must have people who are on your side. I thought that being the son of the owner would make such tasks unnecessary. However, you cannot do everything yourself. This is a tricky process. You must weed out the sycophants from those who are truly productive. One tip: be extra careful with people who engage in flattery. Since I failed to get allies, I hired new personnel that served the purpose!

Get to know the business well before making radical changes. What our parents feared most was that I might take on changes that would damage the business. They have spent many years mastering their trade and so I spent several months studying the business before shifting strategies. Each business is unique and what worked well in another company may prove disastrous to your firm.

Value your parent’s advice. You may think this is an obvious suggestion. However, there are times when I was tempted to dismiss them as being overly conservative. You may want to push on with your grand expansion plans and you may be right. Still it would be prudent to double-check your assumptions if they think it is too optimistic. They have seen hard times when many highflying companies have collapsed. Make sure your firm will survive even in crisis situations.

Plan how to deal with relatives. This is usually both the main problem and the biggest strength of family-owned businesses. The most common issue with relatives is that it is hard to maintain control systems. Since we are all part owners, it was allowed to get what you need without going through the formal process. Many family owned businesses pay relatives very low salaries as they get freebies in return from the company. A possible solution is to raise compensation to market levels in return for compliance with company rules. In dealing with relatives, you must think long and deep. You must weigh the consequences of your actions not only with regard to your bottom line but also on its effect on your family. It is traumatic to fire a relative.

Assert your authority. Rarely will the founder give up control without a struggle. Even when s/he knows that it is long past time to enjoy retirement, the company is their baby and their emotional attachment is hard to break. While the founder’s advise will always be valued, the time must come when you must assert that it is time for them to let go and to trust you with greater responsibilities.

Taking over a family business is no walk in the park. Breaking the inertia to introduce new ideas is a constant challenge. Rallying employees to follow your new leadership is problematic. You must also know how to handle delicate relations with other family members. Most importantly, you have to gain the trust and confidence of your parents. Despite all these, if you make the right moves, a family business may be the best place to work in—especially if you make it so.

(All rights reserved. Copyright by Manila Bulletin and Ruben P. Anlacan, Jr. May not be reproduced or copied without express written permission of the copyright holders.)


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