Family Business Challenges

Family owned businesses face many unique challenges that derive from the overlap of family, ownership, and management systems. You may recognize your own family business in a few of the challenges listed below:

  1. Growth limitations.  Lack of capital and resistance to re-investment in the business or pursuit of outside resources artificially stunts growth.

  2. Non-business issues. Family problems, including health issues, marital affairs, and financial problems create difficult political situations for other family members.

  3. Soft structure. The frequent lack of clear policies and business norms for family members may lead to operational confusion.

  4. Limited vision. Lack of outside input on how to operate the business, as well as competing visions held by various family members, may limit new opportunities.

  5. No written strategy.  Long and short-term plans often remain undocumented.

  6. Compensation issues. Compensation and benefits for various family members may not reflect their actual participation or may conflict with non-family compensation packages

  7. Who’s in charge of what?  Poor definition of roles and responsibilities limits accountability and efficiency.

  8. Skills and talent. Family members may lack the skills and abilities necessary for their positions but it may be impossible to fire them.

  9. High turnover.  “Outsider” employees may sense that family members will always advance quicker; also they may become frustrated with family-directed management.

  10. Succession planning. Uncertainty as to if, how and when the next generation will take control is the omnipresent elephant in the room.

  11. Poor training. Integrating family members into the company are often automatic rather than systematic.

  12. Paternalistic leadership. Tradition and family respect tend to override the pursuit of improved management practices.

  13. Resistance to change.  The desire to keep the status quo can frustrate younger family members and prevent the adoption of new ideas.

  14. Communication problems. Relationships within the family, rather than a clear process, drive communications, leaving them subject to motivation by anger, frustration or envy.​

  15. Exit strategy. Little or no attention may be paid to how to sell, close or merge the business.

  16. Valuation questions. No focus on what the business is worth or what will make it more or less valuable puts family members at odds with the marketplace.

  17. Control issues. Family members with little day-to-day participation may have unusually high levels of control.