Communication Is Key

Allen E. Fishman
Founder, The Alternative Board®
www.thealternativeboard.com/

A whopping 62% of America's workers are employed by family-owned businesses. These businesses are the engines that will drive our economy out of recession. Unfortunately, they can quickly become dysfunctional if their leaders aren't proactive. Consider these four crucial elements.

Don't Hire if You Can't Fire
Create a written policy for hiring, reviewing, and terminating family members. Standards need to be upheld-even if the expectations are different than for a nonfamily employee. Job responsibilities and pay grades should be clear to all. Your company may be family-owned, but its financials are still subject to the law of reality-nonperforming employees have to go.

Be Fair, Not Equal, About Compensation
Compensation is the most emotionally charged issue family businesses face. Let's say that two brothers work for a business run by a parent. One brother works hard and is an asset. The second just drops in occasionally but is paid the same. This is a recipe for disaster. Attempting to keep peace with equal pay for unequal contributions actually provides fuel for future conflicts. Stick to open-book company policies.

Plan to Pass It on Someday
The number of family-owned businesses that fail when the founder passes on is uncountable. Too often, the family member chosen to be the leader of the business doesn't have the required ability or the work ethic. Be proactive. Communicate with your chosen successor so that he or she can start learning the job and grasping the obligations that come with it. Then, create a succession plan that all key family members acknowledge and understand. This will avoid heartache, not to mention lawsuits, in the future.

Get Creative for Your Nonfamily Employees
Some of your most qualified and valuable employees may not be relatives. Don't take for granted that nonrelatives will feel the same sense of inclusion as children, spouses, or siblings of the boss. Approach job security fears head-on, clearly communicating to nonrelatives how much you appreciate their skills and loyalty. Plus, be sure to outline leadership opportunities available to them to keep all your employees performing at a high level. Remember, money talks.

With clear, proactive planning and communication, a family-owned business can be highly successful and even a fun place to work.

Fishman is the author of The Wall Street Journal national best-seller 9 Elements of Family Business Success: A Proven Formula for Improving Leadership & Relationships in Family Businesses (2008, McGraw Hill).