How Many Hats Are You Wearing in Your Family Held Company?

When you work in a private or public organization, your role is clearly defined; you do not face the ambiguity that comes with family and ownership. However, when you hold a position in your family company it gets complicated. As a shareholder member of the family you wear more than one hat. The tough part is figuring out which hat to wear when faced with a particular situation.

Three Hats

A family member may hold many positions within the organization. Regardless of their role, each member wears three hats as a shareholder that works in the family company, and each hat requires a different approach to the business. Deciding which hat to wear in a given situation is not always black or white.

Owner

Owners have a financial stake in the success of the business; they must see the big picture and focus on the long-term goals and strategy that drives the company to success. Their financial and emotional investment in the company is high and if the enterprise fails to prosper their entire economic well-being could be at stake. The pressure of being a business owner increases exponentially when the financial health of your extended family is also at risk.

There are many rewards and challenges that come with being an owner in a family held organization. One of the most stressful times for most owners is when the interests of the business conflict with the family. E.g., when the Director of Sales fails to hit established sales goals the company suffers a financial setback. If the Director repeatedly fails, they must be removed from their position in order to ensure the survival of the organization. In a typical employment situation, the Director would either be fired or demoted. However, when the Director is your brother you are not just firing a poor performer, you are negatively affecting the economic situation of your family member. In this scenario, the Owner hat must be firmly in place in order to make the correct decision for the company because erring on the side of the family could cripple the business.

Positional Role

Each family member working in the business holds a specific role in the organization. They may manage other family or non-family members, or be an individual contributor. They are still owners regardless of their position in the company.

Being an owner/contributor is a delicate balance. Your relationship with non-family staff can be complicated because they know you are also an owner. They may not be willing to share information with you in the same way they would with other team members. The good news is there are actions we can take to minimize the potential negative impact of the “owner” perception.

  • Hold everyone in the business to the same standards to reduce the risk of being treated as “the boss” rather than a team member.
  • Avoid calling family by relationship—i.e. use Susan rather than Aunt Susie.
  • Treat family as peers rather than relatives.
  • Promote the most qualified person regardless of family association by benchmarking the position within the company and appropriately aligning people to positions based on their knowledge, skill, and ability.

The goal is to remove the owner hat and focus on the job at hand.

Family member

Family members may decide to sell their interest in the company. Alternatively, they may choose to leave their role in the organization to try something new. The owner and job role are transient and subject to change–we make a conscious choice to wear these hats. We are born wearing our family hat; we do not get to choose.

The informality and comfort level we have with our family can make it difficult to treat each other as peers and co-workers. We may shout at each other and use harsh words during a disagreement; something most of us would never consider doing with unrelated co-workers.

Setting ground rules can help everyone understand when to wear or set aside their family hat.

  • Benchmark the position; define key accountabilities (KA’s) and objectives for each position within the organization.
  • Clearly define the level of autonomous decision-making authority for the job.

Practical Application

Stop to consider which hat you are wearing in critical situations, and make a conscious decision about whether it is the right hat. Mentally step back and try to view the circumstances objectively.

Find a mentor or external advisor to use as a sounding board when you are unsure which hat is appropriate for a particular situation. Remember, it is always better to seek counsel than to worsen the situation by acting incorrectly.

Establish a board of directors that includes members who are not family, who understand the culture of the company and are external to the organization. When the majority of the board members are independent, it takes the family bias out of the decision-making process and focuses objectively on the business at hand.


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter –  @BrentPatmos and connect with him on LinkedIn.

 

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