Before multi-national businesses exploded across the world, family businesses were the lifeblood of American business. To a large extent, they still are. Small businesses, including family-owned ones, have generated 64 percent (14.5 million) of net new jobs over the past 15 years, according to the Small Business Administration.
This economy has proved challenging for family-owned businesses across the country. If you are part of a multi-family-owned business, you know just how difficult it can sometimes be to manage a business in a down economy—with your siblings.
I know a bit about this topic because I am the product of a family business. Bank of American Fork has been a family-owned business for decades, with our family becoming one of the owners after a major shareholder purchase back in 1971. Through the years, many family members have worked at the bank—and not just my family members: we have countless strands of other local families, be they siblings, parent-child or extended family members, who work together every day.
While it is hard enough to run a successful business during the good times, it is even more difficult to prevent the stress of the bad times from deteriorating business and family relationships.
Here are some things I’ve learned over the years that may be helpful for those managing a family-owned business.
Make a plan and put it in writing. In addition to a long-term strategic plan, your organization needs to define the policies and procedures, roles and responsibilities of all employees. Familiarize employees with these documents and hold people responsible for violations. Don’t rely on handshakes, either. Make sure all agreements are binding.
Treat the business like a business. It’s tempting to make exceptions for or put too much emphasis on the “family” part of family business. Remember that a business exists to provide useful products or services that result in profits. As a business strives to fulfill that goal, it is likely that family harmony may be temporarily or permanently disrupted. Prepare for those situations to keep relationships and the business in tact.
Be fair. When non-family employees see family employees receiving special treatment, there is bound to be grumbling that could lead to dangerous divisiveness and outright revolution. On the other hand, be sure not to hold family employees up to stricter standards than their non-family counterparts. This can lead to the same outcome.
Communicate. In any business setting, communication is paramount. Your employees, family members or not, know what’s going on in the world at large and likely have concerns about the economic impact on their jobs. Address them. Be transparent. Meet with employees frequently. Solicit feedback. The gossip factory is always churning, so counter the rumors with truth.
Don’t be afraid of change. Successful businesses are always innovating, so take advantage of a down economy to evaluate and correct deficiencies. Increase morale by garnering employee suggestions for improvement and offering rewards for ideas that result in cost savings or increased productivity. Everybody wins.
Consider a consultant. When business issues cannot be resolved between family members, consider using a consultant to serve as intermediary. There are consultants available that have expertise specifically in family business who can help produce resolution from an unbiased point of view. These consultants can often help pull out the deeper issues that underlie conflict between family members.
Don’t forget about qualitative capital. Many businesses measure success solely on quantitative issues, such as balance sheets and return on investment. Family businesses, though, (and really all businesses), should also consider qualitative measures. These measures include human and intellectual capital. Successful families use financial success as a means to developing such capital—the real wealth of a family-owned business. I firmly believe that human capital is the part of the business that has the most value and is the primary driver of financial success.
By following the above tenets, family businesses can unleash the energy that it takes to spark the growth and development of our national economy.
Dale Gunther is vice chairman of the board of People’s Utah Bancorp, the holding company for Bank of American Fork. At the start of his 16-year tenure as CEO at Bank of American Fork, the company had two branches and $80 million in assets; it now has 11 branches and $840 million in assets. Dale has served as chairman of the Utah Bankers Association and currently serves as an American Fork city councilman.