Family-Business Overlap Can Create Conflict

In Spokane, Family-Business Overlap Can Create Conflict

Family-business overlap in Spokane is a common source of conflict for family businesses. for example, Greg Wilson is the president and sole owner of Wilson Irrigation, Inc. (WII). He’s 59 and has two children working in the business. His daughter Katy is responsible for marketing and sales. His son Bill is in charge of operations and installations. Greg has begun the succession planning process, but he doesn’t believe his children are ready to manage the business. At this time, he feels it’s in the best interest of the business to transfer the management control to one of his key employees.

Due to the overlap between family and business, Greg’s decision may create bad feelings among his children and dissension in the family. Even though Greg is making a decision based on what he believes is best for the business, the children may perceive their father as being disloyal to them. 

3 Stages of Business Development

There are three stages of development in the life cycle of a business—entrepreneurial, managerial, and corporate (or professional). A company’s stage of development influences the level of family-business overlap in Spokane.

1. Entrepreneurial: This stage is the initial stage of the business and when a majority of the business decisions are made and controlled by an owner. This stage is characterized by a strong owner who builds the business largely through hard work and determination. Owners of most businesses in the entrepreneurial stage spend significant amounts of time working to develop the business. They typically perform all business functions and learn through trial and error. Businesses in the entrepreneurial stage tend to reflect the owner’s values and attitudes.

2. Managerial: The managerial stage is the mid-stage of business development. This stage is often characterized by a gradual shift of management authority from the owner to other key employees. Typically, the business outgrows the owner’s ability to manage all aspects of the operation and the owner is forced to transfer responsibility to others. In addition, the owner may exercise more discipline over the operation’s financial resources to accommodate future growth. These factors tend to reduce the influence of the family over the business and its resources as the business takes on a life of its own.

The managerial stage is often viewed as a transition stage for the business. The business is transitioning from the entrepreneurial stage, where it is heavily influenced by the family and its goals, to the corporate stage, where family influence is minimal. As this transition occurs, the goals and needs of the business begin to take priority over the goals of the family. 

3. Corporate or Professional: The corporate, or professional stage is the final stage of an operation’s development. In this stage, business decisions are based on what is best for the business. There is little, if any, family influence over the enterprises. Instead, the family is forced to conform to the policies of the business. This stage is characterized by a highly structured management team, market-based strategic planning, and specific corporate policies and procedures. 

Family Business Owner Principles That Guide Decision Making

In a family business, the owner must balance the needs of the business with the needs of the family. An owner’s emphasis on family and/or business needs can be determined by understanding the principles an owner may use to make decisions, i.e.: the following opposing principles:

Family Principles Business Principles
Based on emotions Based on accomplishing tasks
Value who you are Value what you do
Acceptance is unconditional Acceptance is performance-based
Forgive Mistakes Record Mistakes
Authority by generation and birth order Authority by role and power
Encourage broad life experience Focus on business activities
Equal treatment Rewards for competence and performance
Lasting relationships Task-based relationships

4 Types of Spokane Business Owners

When it comes to Spokane family-business overlap, it starts at the top. An owner prioritizes their business and their family as they see fit. Some put all their effort into achieving goals and ignore their family. For others the opposite is true. Below are the four basic ways family business owners approach building a business with their family.

1. Business: High Priority – Family: Low Priority

Many owners place their emphasis on developing the business. This is especially common among entrepreneurs and business founders. Their daily activities are focused exclusively on developing and expanding the business. They are consumed with a passion to create a successful business. Although their primary motivation may be to provide for their family financially, they often neglect their family’s emotional needs in the process.

2. Business: Low Priority – Family: High Priority

Some owners believe the role of the business is to provide for the family. These owners often run the business like a family. They believe each family member has a right to work in the business, regardless of the member’s qualifications. They also believe all members should be treated equally and design their compensation strategy accordingly. Unfortunately, these businesses tend to perform poorly due to their lack of professional operation.

3. Business: High Priority – Family: High Priority

An increasing number of family business owners strive to achieve both successful family life and a successful business. These owners operate their business in a professional business-like manner. They implement policies and procedures that ensure the business will not become a tool to serve the family. They also hire qualified employees to help manage the business. At the same time, they make time for their family and attempt to raise their children to respect the business boundaries of the family enterprise.

4. Business: Low Priority – Family: Low Priority

The worst approach of all occurs when the owner places a low priority on both the family and the business. In these instances, the owner devotes little attention to either, causing both to suffer. Fortunately, this approach is not too common. It is typically found in companies that are run by second or third-generation owners who do not have the skills or motivation to effectively manage the business or their family.

Spokane Family Business Owners Can  Make It Work

For owners, the best approach may be a clear and intentional focus on what’s important. Specific goals and family employment policies will help the owner and the family emphasis what’s important and how the family and the business function together. Some Spokane family-business overlap is inevitable, but it does not have to cause major problems. Have a succession plan in place and a contingency plan as well to foster a healthy work and family balance.