A Family or a Business?

Running a successful family business can often be more difficult than running a non-family business because the dynamics of management are blurred.

Family-run companies can slide into trouble when owners don't differentiate between what's acceptable in the

Setting Up Metrics

    Using performance metrics, or ways to measure performance, can reduce labor costs.
    
Today, many effective managers follow a significant rule of thumb: Work not measured cannot be managed.
    The major functions in each of your company's departments should be identified in terms of volume and time, and managers should be aware of those measurements.
    Consider asking managers to provide written answers to these three questions:
  • How do you measure work in your department? (For example, this could be the number of invoices filed, holes drilled, or phone calls made.) 
  • What is the hourly or daily volume?
  • How much time is required to complete each unit of work? You don't want a description of the processes in each department. You want quantities.
    Collect the answers and then ask managers to get hard data from department supervisors. Compare the two sets of data and you can learn a great deal about how well employees are performing and how well they are managed.
    In essence, this exercise is a return to the basics of quality, service and efficiency. Setting standards and using metrics to ensure that everyone at your company -- family and non-family members - are meeting those standards is a good way to achieve success.
family and what's acceptable for the business. A common question that needs to be answered: Do you have a family-first business or a business-first family?

A paternalistic culture can lead to management that is based more on consensus than on performance and action.

To ensure that your family-run business operates efficiently, set up performance standards that every working relative must meet. Here are five steps to help set up the criteria and measure performance:
1. Develop clear job descriptions that outline responsibilities, set expectations, and clarify roles. Hold each family member accountable. Within the dynamics of a family, when someone makes a mistake, of course, the family generally still loves and supports the person. But that doesn't work in business. When an employee makes a mistake, whether it's a relative or not, there has to be a price to pay.

Evaluate the relatives in your business by their performance, not by family tolerance. For example, your daughter can't come to work at 10:30 in the morning if the rest of the company is expected to be at their desks and working by nine.

When you offer feedback, take a professional stance, not a paternal or maternal perspective. Otherwise, you make the feedback, or criticism, sound like a simple family complaint.

Link mistakes to the business consequences, not a relative's shortcomings or personality. For example, if your brother sends out sloppy letters or documents, let him know that he runs the serious risk of losing customers.

2. Define job parameters. Let's say you hire your son to work in the human resources department. That doesn't automatically give him the right to exercise authority over the marketing director or department managers. When you bring family members into the company, be sure they don't feel entitled by blood to make decisions outside the specifics of their job responsibilities. Otherwise, you run the risk of fomenting resentment among other employees and the possibility of suffering the financial consequences or some bad decisions.

3. Create ways for non-family employees to feel valued. If you put ceilings on how far non-family employees can advance, be clear and up front about it. Otherwise you may wind up getting only mediocre performance from non-family employees and find it difficult to attract and retain the outside talent you need.

If you do have a ceiling on promotions for non-family, consider offering special perks or training, or other opportunities to compensate. If you don't offer equity in the company to non-family members, consider offering them performance-based bonus pay or incentives that provide substantial rewards.

And be certain to have a formal written employee handbook that applies to all staff members. Non-family employees will see that the policies are fair and family members will clearly understand what is expected of them.

4. Leave work at the office and family issues at home. If, during dinner, a family member brings up a work problem, suggest setting aside some time during the week to discuss it at the office. And if a family member comes to the workplace to discuss a non-urgent family problem, tell that individual you can talk about it over dinner or on the weekend.

5. Create a board of advisers to oversee measurements and standards for family members and to carry out regularly scheduled, formal performance reviews. Outside consultants and specialists who understand family businesses can help support your company by giving advice on such complicated issues as firing a family member and discussing performance shortcomings.

The Bottom Line: Adequate standards of performance are essential to keep a family business running successfully.

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