When you look at global giants like Nike, Facebook or Samsung, you probably don’t see them as family firms, but they are. Maybe it’s one of the reasons they’ve done so well – the Edelman Trust Barometer 2016 revealed that globally, 66% of people trust family-owned companies the most.
In the UK, two-thirds of businesses are family owned and make up a quarter of our gross domestic product (GDP), in 2015 alone they contributed £133 billion in taxes. So family businesses are definitely good for our economy, but they do come with their own unique set of problems.
The risks of running a family business
- Family conflict – keeping personal and business matters separate is crucial to the success of your business. Sibling rivalry, divorce or family tensions can all impact on productivity and profitability.
- Nepotism – it’s natural to want your family to fill key roles in your organisation. That’s fine, as long as they’re hired, promoted and rewarded on the basis of skill and ability. Not just because they’re related to you. Be aware of how you treat and compensate both family and non-family employees. Make sure it is consistent and fair to avoid any employment practice liability claims.
- Emotions – it’s easy to let your heart rule your head, especially when dealing with people close to you. In order to make sound business decisions and provide strong leadership, it’s essential to keep your emotions in check.
- Becoming insular – your business may suffer if run solely by family members. It’s much healthier to bring in people from outside, injecting fresh ideas and helping you view the business from a different perspective.
- No succession plan – many family businesses fail to plan for when someone leaves, retires or dies. This can create uncertainty for the long-term future of the business.
According to the Office for National Statistics, companies with the founder’s family at the helm are on average 20% less productive than other businesses. And that has a serious impact. Not just on your organisation, but also on business growth in the UK as a whole.
If you’d like to find out how you can manage the risks associated with running a family business take a look at our infographic.