[Special Report: M&A Update] All in the family

Features - Business Strategy

Whether you’re preparing to sell your business or not, pest management professionals walk a high wire when they mix business and family. Here are some strategies to prevent your family from a fall.

March 31, 2011
Steve Smith

Whether you’re preparing to sell your business or not, pest management professionals walk a high wire when they mix business and family. Here are some strategies to prevent your family from a fall.

When a family business succeeds, it’s a thing of beauty: father and son, brother and sister sharing in the rewards and support that only family can provide. But when a family firm goes wrong, it can go very wrong, ripping a family tree apart by the roots and leaving a mound of psychological and financial debris behind.

So how can your family avoid a disaster? Put extra emphasis on documentation, communication and professionalism, says family business expert Ira Bryck.

“Ultimately you have to treat your business like a business and your family like a family,” Bryck says. It’s a catchy slogan, but its full meaning translates into hard work and due diligence. “Treating your business like a business really means going overboard with professional structure and processes, even though your coworkers are family,” Bryck says.

Bryck worked alongside his parents for 17 years and now advises family-run firms as director of the University of Massachusetts Family Business Center. Based on his interaction with thousands of entrepreneurial families, Bryck says these strategies will keep your family and its businesses on the right path.

Above All, Be Honest.
It’s easy for families to swing between being overly critical or overly forgiving with one another at work. The antidote to both ills is honest, yet tactful, communication, beginning with a realistic assessment of whether or not you can work together.

“Your family must have the ability to peacefully resolve conflict,” Bryck says. “If you don’t have the flexibility and sense of humor to be able to appreciate each other, then you are really asking for trouble. And, frankly, many families don’t have that.”

Document, Document, Document.
Because the employees are mom and dad, brother and sister, families who work together often falsely assume they don’t need much documentation. But Bryck stresses that paperwork is even more important for family-run firms because when family drama creeps into the workplace, a foundation of written principles will keep everyone on the same page.

Most states require a partnership agreement, a legal contract stipulating the details of how individuals will collaborate in business and how they intend to share profits and losses among involved parties. Beyond that, Bryck suggests a family business create a partnership charter, a series of documents that stipulate the business’ vision, goals, code of conduct, employee handbook, processes and systems, emergency planning, succession planning and more.

“Lock the family in a room and talk frankly about what is expected from each family member and what the business is about. Once the major issues are agreed upon, then it’s time to put the details in writing. Then reevaluate and update those documents every year,” Bryck says.

Build A Meritocracy.
The biggest issues facing a family business are how to divide the responsibilities among individual family members and how to handle compensation. It may be tempting to “keep things equal,” thinking that paying each family member the same amount will keep the peace. But that’s a recipe for mediocrity, Bryck says. Accordingly, he suggests every family business use written job descriptions with each job having a set compensation level based on the job and the free market value of the required skill set.

What’s more, compensation should be bolstered by incentives and performance-based bonuses — documented with written goals and benchmarks — so that high-achieving family members are rewarded for their successes. “This kind of documentation helps avoid miscommunication and resolve conflicts over how and why individual family members are compensated,” Bryck says.

When it comes to ownership and profit-sharing, it often makes sense to split things evenly. But with annual salary, a performance-based system is vital for keeping each family member properly motivated. Further, the sense of fairness and opportunity created by a meritocracy is crucial for attracting and retaining non-family employees as the business expands.

A Major Corporation.
Families who work together often become too informal, assuming, for example, that a conversation over Sunday night dinner is sufficient for planning the work week ahead. While Bryck doesn’t object to talking shop at home, he cautions that it’s dangerous for families to ignore the formalities of a professionally run enterprise. Ultimately, the more room you leave for miscommunication, the more volatile a family firm can become.

Hold weekly staff meetings at the office, even if the “staff” is mom, dad, cousin and sister. “If Dad has an idea, he needs to write it down and add it to that week’s meeting agenda, rather than calling Junior at midnight on a Saturday,” Bryck cautions.

Seek Outside Perspective.
Because it’s easy for family members to get complacent and comfortable with one another, it’s crucial to solicit feedback from outside professionals.

Family business owners should assemble a board of advisors who can periodically provide a candid evaluation of the business and its employees, without the filter of familial relationships. “And if you don’t have a board of advisors, join a roundtable at your local Chamber or business organization,” Bryck says. “And if you don’t have access to one of those, then just go out to lunch occasionally with other business owners who have an angle on something you need to know about.”

Keep Business Separate.
Fortunately, Bryck says, he rarely sees a complete disintegration of the family when a family business fails. “Usually family businesses succeed or fail, rather than completely blow up. But when they do burst apart, it is usually because one party feels like he or she has been wronged and that’s when litigation ensues.”

That’s why it’s so vital to spell out key details in writing and get the buy-in, even signed agreements, from all involved family members. With every detail clear up-front, there’s much less chance for hurt feelings later on. Plus, the structure and professional culture you’ve created at the business will help minimize the impact when a family relationship hits a rough patch outside of work.

Once the parameters of the business are in place and running, make every effort to separate work time and work roles, from family time and family roles. “You really need to sit down with your family right in the beginning and formally lay out what the business is and document it. Then make it clear that love for each family member will be expressed separately from opinions about what the business needs to succeed,” Bryck says.

But be clear, Bryck warns, no matter how well you’ve structured your business, ultimately working with family requires all involved to possess an advanced level of maturity, a level head, loads of personal discipline and exceptional communication. If you can’t say that about your family, think twice about including them in your venture.

The author is a former editor of PCT magazine. He can be reached at ssmith@giemedia.com.