November 20, 2017
family business, successor

How to Overcome the Challenges Involved in a Family Business & Pick a Worthy Successor?

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A family business is bound by a primary characteristic which is the combined effort of building a business from scratch spanning decades or more. Whether the size of business remains small, medium or large, all the members involved in trade contribute something special and work hard toward the development and success of business.

Business Management among Family Members

Leadership is one of the intense, challenging factors in a family business.

The zest for leadership can cause problems and hardships in a family business. The members may formulate contradicting opinions concerning management practices or finances, which ends with splitting up the business. So, unification & finding a consensus among all members can become an arduous task.

A popular myth surrounding families since the time immemorial is an assumption that the spirit of entrepreneurship and devotion to work are the only traits that construct a family business. It is taken for granted that all family members must be involved in the tasks.

But different members of the family do not have an obligation to relate to the same set of interests. Neither, become equals, and the callings difference, that means that not all members will have an entrepreneurial profile.

Not everyone possesses the same entrepreneurial nature, and the differences that exist among one another should be embraced rather than calling them out.

It is necessary to understand and respect the lack of skills in a member. Instead, allow freedom so they may pursue their talents. Perhaps they will join the family business as a follower, if not as a leader.

Also Read: Thinking About Going Into a Business You Love? Here are 5 Reasons to Think Again!

Organising a Company with Family Members

There are three pillars that maintain the structure of a family-led enterprise: business, family, & property.

All the decisions concerning budget & management will eventually affect the relative participants. Unless there is a professionally stable, qualified and mature direction; unavoidable conflicts are bound to occur.

For a proper organisation, it is essential to formalise some management factors. One such factor capable of showing the direction, bring integration and a substantially responsible management, is the formation of Corporate Governance.

Corporate Governance is a brilliant path to pursue and it includes four key factors:

  • Business Identity
  • Discipline
  • Direction, &,
  • Flexibility.

Also Read: How Can Scalability Help Your Business To Prosper?

Administrative Board of a Family Business

It is advised that even a family business, which typically does not require an ‘administrative board,’ should apply for it. It offers an opportunity to sustain the uniformity, direction and also helps with decision-making.

The company may choose either an administrative or advisory board. The council aims to advise and aim at the following crucial factors:

  • Objectivity in decisions
  • Perspectives
  • Identification of new opportunities and possible changes

Also Read: What is Outcome Driven Innovation and What You must Know?

Ethics in a family business

Ethics works as a guide in all family business decisions regarding profit sharing, as well as, other ethical issues.

It must fulfil the principle of the entity. The company’s organisation must run separately from that of the family’s. Ethics play a wise role in the principles of accounting.

That is why ethics play a critical role in the utilisation of Assets and Capital earmarked for the developmental activities and growth.

Personnel Management is also an urging ethical factor. The recruitment, hiring, and promotion of employees should bring benefits to the company and not serve personal interests.

Also Read: How Coaching Can Help Your Entrepreneurial Career?

Conclusion

Succession in a family business lies behind a controversy in the business world. It raises the question behind intentions covering personal and professional relations, the grooming of successors, and the conflicts that arise along the way.

It is important to accept the successor as decided by the Advisory Board or depending on who is best for the business but definitely not out of personal favouritism. Choose a successor out of consensus and not bitterness.

Also, ensure that the successor is well-groomed for the job and accepts the role with a sound mind & body.

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Reneide is a Creative Content Creator & Social Media Promoter who brings a tremendous experience of past 7 years to the platform. She is associated with a number of budding Startup Enterprises from around the world who rely on her client-oriented writing skills. Her passions include Tech, Business, and Entrepreneurship, which she writes about on a regular basis.

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