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Welcome to the launch of ASK ROCK, an advice column where industry expert Rock LaManna will answer your questions on topics such as: key financials for every business, and how it can lead to profitable organic growth, M&As, strategic alliances, succession plans, and exit strategies. He will also talk about leadership and present family business case studies.
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A good question, and one we see quite often. To reach a resolution, you have to understand there are two systems in a family business – the family system and the business system.
The family system is emotion-based. The people in the system are bound together by their family emotional ties. It’s oriented inward towards the security and nurturance of its members. It also operates to minimize change in the status quo. It is designed to resist disturbance of the balance and integrity of the system.
The business system is task-based. It is comprised of people who are organized around their common interest in the work product of the system. It operates to exploit change in the interest of growth and survival.
You can expect some overlap between these two systems. However, they become dysfunctional when the overlap is too great, and there is a lack of formal systems in place to prevent family loyalty from impairing business decisions.
Formality, in the form of established business metrics, is the first step to avoiding the problem. Having formal processes in place to review job performance is critical. It allows a family to make decisions because the results are in black and white, and the consequences are unavoidable.
In the family business, there are rules that are “implicit.” If you don’t get your job done, you get fired. If you don’t hit your quota, you don’t get a bonus. But if these rules are never made “explicit,” the family system takes over. The issue is lost in a pool of conflicting emotions, and nothing ever happens.
Formalize processes and set clear goals with ironclad consequences. It’s the only way to separate the two systems.
The LaManna Alliance is a business advisory and consulting firm that helps printing owners and CEOs use their company financials to create successful strategies. Visit their website for more on family-owned business problems.