Unique Challenges of Scaling Up a Family-Run Business

Posted by The Align Team on Apr 6, 2017 9:40:00 AM

With National Siblings Day coming up Monday, we wanted to take a look at the unique challenges of scaling up family-owned businesses. When personal relations get involved, it can be hard to stay objective about what’s best for your organization.

What to Avoid When Scaling Up A Family-Run Business

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Some business experts wonder if the family-run business model is outdated in today’s global economy. Is “keeping it in the family” still relevant? Can you make a profit?  

But for every business that fails to keep it in house, there are still plenty of family-owned businesses flourishing worldwide. Well-known family-run businesses in the U.S. include Walmart, Nike, and Oracle.

What are the biggest challenges your family-run business will need to overcome to scale up effectively?

Let the Data Speak

One of the most common issues in family-controlled businesses is a tendency for favoritism and nepotism. Some execs find it hard to balance their personal and professional lives, and private feelings, biases, and preferences can get in the way.

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In the scaling up process, there is a key focus on data and how you use it. You know that you need to track your KPIs, make info easily accessible, and keep everyone informed.

One way to try to avoid nepotism and other biases is to keep your data at the core of your business decisions. When you keep a close watch on your KPIs, you can use this information to quantitatively show what strategies are successful, and which areas of your business need work.

Use data to decide who gets that promotion, which marketing strategy to ditch, and where to break into new markets. If you do the right amount of strategic planning and research, you can let the numbers speak for themselves. Don’t blindly follow Uncle Bob’s opinion just because he’s the oldest—instead, use hard evidence to make informed decisions about the company.

Maintain Communication Rhythm 

We all know that scaling up requires a steady rhythm of communication. To keep team members at all levels informed about company targets and priorities, communication needs to be frequent and consistent. Otherwise, you get employees working on superfluous tasks, and your team isn’t aligned. What a big waste of time.

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In a family-run operation, this need for communication is more important than ever. While you might think your family members can read your mind or guess your motives on key decisions because they know you so well, this usually isn’t the case.

Family-run businesses also often have to balance different personalities and avoid personal misunderstandings in their dealings. A consistent meeting rhythm can help prevent these issues since it gets everyone on the same page, and you can deal with problems as soon as they come up.

Don’t let your communication rhythm of daily huddles and consistent meetings go by the wayside just because you’re all familiar with each other.

Spice it Up

Another important element of scaling up is having A+ people in positions they can succeed in.

As business author Verne Harnish says, “Focus on getting the right people doing the right things with clear accountabilities and metrics.”

One of the potential pitfalls of family-run businesses can be a lack of talent or new ideas.

One solution is to involve family members from different generations, backgrounds, and skillsets in the decision-making process. When you involve diverse perspectives in quarterly planning meetings and other key events, you get a fresh influx of new ideas. Your twenty-year-old grandson probably has some interesting thoughts on marketing your company online, and Grandma Muriel might have some time-tested advice on keeping your cash flow positive.

While your family members/business partners can and should take the time to develop new skillsets, don’t be afraid to recruit talent from outside the family when it comes to specific roles or key expertise.

You can keep your family members as important stakeholders and decision-makers in the business even if you need to recruit for specific positions. One example is when seventy-year-old cosmetics company Estee Lauder finally hired its first outside CEO in 2009, but William Lauder, the grandson of the original founders, remained the executive chairman of the board.

Ultimately, there are a lot of benefits to family-owned businesses. Family co-founders and business partners often report higher levels of trust and support, and plenty of family-owned businesses have become wildly successful. 

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When it comes down to it, just make sure to keep these unique challenges in mind when you try to scale up a family-owned business. Ultimately, it's your underlying processes and strategy decisions that will affect your company's chances at becoming successful. 


If you enjoyed this article, check out some info on similar topics: 

How Founders Around the World Maintain a Work-Life Balance

Scale Up Without Compromising Your Purpose

To make sure your busines is on the path to scaling up, make sure you're implementing the Rockefeller Habits processes correctly. Download our Rockefeller Habits Execution Checklist to find areas where you might be falling short in your implementation. 

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Topics: team alignment, scaling up, business success

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