01 Apr 5 Things You Need to Know when Professionalizing you Family Business
Most family businesses start small and are run rather informally, usually with one or two people calling the shots. As the business grows and more people are hired, things can go along for years without much in the way of formal procedures or written rules.
And as the next generation joins the business, a certain level of informality may be part of the culture as well. That isn’t necessarily a bad thing, but behaving at the office as you do around the dinner table can have its drawbacks.
Many people recommend “professionalizing” your family business, and with good reason. But what exactly does that mean, and how do you do it?
The best place to begin with professionalizing your family business is with the education of the next generation that enters the business. If your children, or grandchildren, have the ability to go to university and get a degree, that can be very beneficial for the business. Further education and work experience outside the family business not only helps to build a valuable skill set, but it also prevents a limit of choices in the future.
Hiring Non-Family Employees
The quickest way to professionalize any business is to hire people who are professional in the way they operate, hopefully also bringing along some work experience. Aim to bring in outsiders who are more professional than the people you currently employ, treat them professionally, listen to their ideas, and learn from them. You can only go so far without great non-family people on your team.
Every business needs and has outside professionals that they deal with, such as accountants and lawyers. They often began with friends or whomever they could afford when starting out. As the business grows, it is sometimes necessary to move up the ranks and switch to professionals who are at the level you require. It is quite possible that your business has outgrown your professional advisors, and an upgrade will be needed. It isn’t always easy to cut these ties but can be necessary.
The HR Department
During the growth of any business, the need to begin to treat Human Resources as its own department becomes key. The sooner you acknowledge this, the better. Your business can only grow as quickly and as far as the ability of your people to grow along with it. A real HR department will think twice (hopefully) before agreeing to blindly hire a family member and put them into a role for which they are ill-suited and unqualified. This issue has tripped up more family businesses than you can imagine, as mistakes like this cost not only the department where the person works but can get everyone shaking their heads about what is important to the business. The biggest part of this comes down to attitude. Finding, onboarding, and keeping great people is a must for just about every business. And so is having the right people filling all key roles.
Board of Advisors
Last but certainly not least is the company’s board. I know that even fathoming a true Board of Directors is a complete non-starter for most small family businesses. So why not start small and informally, with a board of advisors? The outside perspective alone is worth it, even if it is only to help you look at your own family members more objectively. Bringing in independent advisors (preferably NOT your current lawyer and accountant) can be the single biggest step to professionalizing your family business. Just ask anyone who has done it.