Running a family business with your spouse or relative can either strengthen your esteem for one another or tarnish your relationship with the person you cherish the most. Even for Sean and I, twin brothers and co-founders of Camino Financial, the road was a little bumpy when we first started the company. We thought we’d make perfect business partners since we both are identical twins who lived together their entire lives, shared the same education, had similar careers on Wall Street, and are passionate about helping Latino entrepreneurs learn, grow and succeed. Today, our personal relationship is stronger than ever, but we had to establish new norms to ensure we always kept our business interests top of mind when making decisions and engaging at the office.
What about family businesses make them more complicated to manage?
- Family members may feel entitled to serve in management positions without having the necessary qualifications
- Family businesses are largely built on trust and have a higher tendency to lack formal processes to manage finances and operations
- A high occurrence of heated discussions among family members who are not accustomed to reserve their judgment and tone when communicating with each other at home
- Deep personal relationships may create a bias towards giving positive performance reviews or omitting constructive criticism
If you’ve run a family business or have seen The Godfather, I’m preaching to the choir with this list of challenges. So how do you avoid drama in a family business?
The key to avoiding drama with your family at work is keeping personal matters outside of the workplace. First, you need to clearly share your business goals with your partners and employees and act according to your strategy. Visual aids like presentations and a screen showing key performance indicators (e.g. daily sales) can help reinforce the business goals every day in the workplace. When you consistently back your words with action, people will know you mean business.
That’s enough drama for one blog! Now, I want to share a few tips on how you run a family business with 100% productivity.
3 Tips to Ensure Your Family Business is 100% Productive
1. Clearly define everyone’s role
Half the battle with running a family business is preventing you and your team from stepping on each other’s feet. Especially in the case of spouses, a married couple is probably more prone to be opinionated on all matters such as what you wear, how your furnish your home or the name of your children. This is a slippery slope in business because it may cause unnecessary debates which can slow the decision making process, thus resulting in missed business opportunities. The trick here is to pick roles catered to each of your strengths and stay in your lane.
For example, Rick and Patty Arvielo co-founded New American Funding, one of the largest mortgage lenders in the U.S. originating over $22 billion in home loans. They’ve grown the business together from the ground up and have proven to be one of the most powerful duos in the lending industry. After meeting the couple at their headquarters in Tustin, California, I learned what made them great business partners. Rick’s background is in marketing and analytics, and Patty’s is in sales and operations. Guess what their roles are at work? By having clear and independent roles, Rick and Patty’s business weathered the Great Recession while their competitors exited the market or were left behind.
2. Establish a performance review process to determine promotions and compensation
Now that you know what each person does at the company, you need to establish an objective way to measure performance. Even when someone is naturally gifted like Lionel Messi, he still needed intense training and coaching to become the best in the sport. To coach your family at work, set up a formal process to review each other’s performance. Key elements of a performance review process should include:
- An evaluation template with the employee’s goals, a performance tracker, and actions taken to achieve the goals
- Coaching check-ins once per month to see how each employee is tracking their goals
- Bonus plan to reward employees for achieving their goals
- Company-wide employee recognition for employee accomplishments
Also when establishing each employee’s individual goals, it’s important to tie these goals to the overall business goals so they appreciate the impact they have on the family business. Overall, a performance review process helps you hold everyone accountable and prevent personal emotions from clouding your judgment.
3. Establish company norms and cultivate a professional culture
Company norms refer to the agreement of acceptable behavior within a company or organization which don’t require strict enforcement. In other words, norms determine how people act when they are at the office. For instance, one of the norms at Camino Financial is keeping our client’s information secure. If any of our employees keep their laptop open and unlocked on their desk, their peers will take a picture, send it to the entire company and ask them to deposit $5 to a “security breach jar”. The point here is you can’t be in the office or store all the time to enforce strict rules. When working with family members, you may have different norms at home than those at work. Therefore, in a family business it’s even more important to establish norms to cultivate a productive and professional culture.
Some best practices to establish company norms are the following:
- The entire management team should lead by example
- Introduce the norms at a company meeting, and make them visible to your employees (e.g. create a plaque where you employee can see them every day)
- Recognize people who follow the norms
- Terminate people who consistently violate the norms. It only takes one bad apple to rotten the batch.
- Tell stories or case studies in which following the norms helped achieve business goals
If you’re interested in reading one of my favorite books on leadership and company culture, I strongly recommend you Good to Great by Jim Collins. If don’t have time to read, listen to the audiobook on Audible.
Running a family business can make things a little more complicated than normal. It comes with some added challenges and key elements you’ll have to bear in mind on a everyday basis. But at the core, the same management principles apply to family and corporate businesses. I’d argue family businesses are more incentivized to adopt the tips above to avoid jeopardizing the one of the thing we value the most: our love for family.