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Tag: Managing a Family Business

  • 7 Strategies for Dealing with Gender Bias in Family Businesses | Entrepreneur

    7 Strategies for Dealing with Gender Bias in Family Businesses | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    For Janette Silva, having a family business has been both a blessing and a curse. As the sole daughter, her involvement with the family business was never predetermined, in contrast to her brothers, who have enjoyed the security of stable salaries and lifelong perks a family business brings.

    Gradually, Silva took on the mantle of running the company, yet the official CEO title remained out of her grasp. In addition to her professional duties, she shouldered the care of her aging parents and managed her household responsibilities. This burden wasn’t the subject of discussion but rather her family’s unspoken expectation. At her workplace, she often cringed when she heard phrases like, “You don’t know what you’re talking about; let me talk to your dad” or “Ah, I see, you got this job because you’re his daughter.”

    Although women in the broader business landscape contend with various gender biases, those in family businesses grapple with an added layer of complexity and severity that further complicates the picture — and the situation is worse than it might appear.

    Related: Running a Family Business Means You Need to Prepare Your Kids to Take Over — Here’s How to Do It Right.

    Revealing gender discrimination in family businesses

    Regrettably, stories like Silva’s are all too familiar. That should be no surprise, as gender-based expectations persistently permeate family dynamics. Nevertheless, in today’s world, it’s both unjust and unwise to limit the prospects of a capable family member on the basis of their gender.

    A research team composed of experts from my team at Loyola Marymount University’s Family Business Entrepreneurship Program, Business Consulting Resources, the University of San Francisco’s Gellert Family Business Center and Women Leaders in Family Enterprises decided to examine this issue more closely.

    We were curious about the extent to which women face uphill battles and how the experience of bias and discrimination in the family business impacts how they perceive their own sense of work performance and career progressions. We embarked on an extensive three-year study, which entailed conducting qualitative interviews and organizing focus groups in 2019 and 2020. This was followed in 2023 by an extensive survey involving more than 100 women leaders. Our respondents primarily represented multi-generational businesses (77%) consisting predominantly of CEOs or senior managers (74%) who boasted an average tenure of 16 years.

    Remarkable revelations

    Our study revealed that gender discrimination still casts a shadow, manifesting as the infamous “glass ceiling effect,” the persistent “sticky floor impact” and a lack of opportunities in leadership roles. Around 49% of our respondents reported experiencing gender bias (compared to 42% for all businesses in the U.S., according to Pew Research from 2017). Forty percent of the respondents who acknowledged bias also expressed a belief that their gender had hindered their progress within the family business.

    Given that our survey respondents were mostly top managers, it is not surprising that much of the biases came from the external business environment. They emanated from customers (51%), vendors (37%) and the broader business community (45%), highlighting the pervasiveness of the issue in our society. Astonishingly, family members themselves served as the source of discrimination in over a third of cases.

    One respondent candidly shared, “My father openly says women are no good in business,” while another recounted, “The men in the family are automatically granted the most senior positions, leaving me with limited options.” Additional comments painted a similar picture: “Had I been a boy, I would have been a managing director, but as a girl I wasn’t considered,” and “I was told that the CEO position would always be held by a male.” One woman leader poignantly reflected, “In my family business, I had to work tirelessly compared to my brothers to achieve the same recognition.”

    The consequences of gender biases proved enduring, leaving a lasting impact on those affected. Individuals who experienced bias reported that it had a detrimental effect on their work performance. They were more prone to suffering from imposter syndrome — an affliction characterized by feelings of inadequacy, self-doubt and a haunting fear of being exposed as a fraud. This syndrome had the potential to further erode their performance, making these findings both eye-opening and concerning.

    Related: The Pros and Cons of Hiring Family Members in a Small Business

    Navigating unique challenges in family businesses

    Women in family-owned businesses have traditionally fared better than those in large publicly owned companies. For instance, it was widely celebrated that, as of January 2023, women had exceeded the 10% threshold for Fortune 500 CEOs. On the other hand, it is generally accepted that at least 24% of family businesses are led by a woman CEO or president. This progress is commendable, especially when considering that family businesses often impose distinctive challenges to their female members.

    One key challenge arises from entrenched family traditions rooted in the culture and history of these businesses, which can overshadow an objective assessment of qualifications. Typically, sons ascend to leadership roles, relegating daughters to supportive positions, regardless of their abilities. Furthermore, the familial dynamics and the informal nature of decision-making within these family units — relying more on personal biases and stereotypes than formal policies and procedures — can further perpetuate gender disparities. Compounding the problem is the usual absence of external oversight (e.g., external board members) in family-owned enterprises.

    Adding to the complexity of gender discrimination in family businesses is its deeply impactful nature. Women who experience gender bias often encounter it from their own kin, including parents, siblings and close family associates. This personal dimension can heighten the emotional toll, and confronting family members risks straining vital relationships further.

    Due to their emotional commitment in the legacy of the business, many women find it exceedingly difficult to pursue other opportunities, even when discrimination persists. This predicament is exacerbated by the fact that women in family businesses often have limited external support systems to turn to, as seeking help from external sources can amplify familial conflicts. As a result, women who grapple with gender discrimination in family businesses often find themselves extremely isolated, making the experience all the more formidable.

    This type of situation could sound familiar to you — perhaps you’re the leader of a family business or have experienced it firsthand. But it is possible to break the chains of gender bias and impostor syndrome in family business.

    The following are the strategic steps you can take to not only dispel gender bias but also fortify family dynamics and improve business performance.

    Acknowledge the problem: Collectively agree on the presence of gender bias within the family business and the need for change. Ensure buy-in and commitment from top leadership.

    Revamp the family charter: Revise the family charter or institute a code of conduct that explicitly champions gender equality and nondiscrimination within the family and the business.

    Educate and raise awareness: Educate all family members and employees about the prevalence and significance of gender equality using workshops and other training programs.

    Implement a gender-equal HR policy: Rework the HR policies to ensure fairness, objectivity and transparency across all facets — hiring, evaluation, promotion and compensation.

    Forge an equal opportunity succession plan: Redefine succession planning through an egalitarian lens, focusing on capabilities rather than gender.

    Foster a supportive culture: Establish an inclusive and supportive work culture where every individual can freely voice concerns without reprisal. This culture also acts as a potent antidote to imposter syndrome.

    Tap into external expertise: Consider enlisting the aid of external consultants or experts in diversity and inclusion to provide guidance and offer an objective perspective.

    Related: How to Sustain a Family Business Across Generations

    Transforming family businesses

    Gender bias in family businesses can have a detrimental effect on both the business and the family. On the other hand, breaking free from bias and discrimination and rewriting the rules can have a positive impact on the business, leading to improved morale and a competitive advantage in the marketplace. It also fosters more harmonious family relationships, allowing both the family and the business to truly flourish.

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    David Y. Choi

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  • The Pros and Cons of Hiring Family Members in a Small Business | Entrepreneur

    The Pros and Cons of Hiring Family Members in a Small Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Even though we already had four children, when my husband Phil and I started CorpNet, our goal was not to create a dynastic family firm. Yet here we are, 14 years later, with two kids on the payroll.

    That’s not unusual; there are over 5.5 million family-owned businesses in America. Like most small businesses, family-owned companies struggle to find skilled employees. To meet this challenge, small business owners should ignore conventional wisdom and explore all avenues of finding good workers. One way to find the employees you need is to do what we did — hire family members, whether your own or relatives of your current staff.

    While this may be perceived as nepotism, hiring family members has several strategic advantages.

    Related: 5 Tips to Successfully Manage ‘Friends and Family’ Hires

    The pros

    1. Shared vision and values

    Family members often share similar values, work ethics and long-term goals. In PwC’s 2023 U.S. Family Business Survey, 90% of respondents of all generations say, “Growth is important because it enables them to invest in their company’s future.”

    Your kids likely share your values and goals. But look beyond that. Let’s say you have a high-performing employee that fits your company’s culture — they may have a sibling or a spouse with the same traits. Hiring them (of course, you should vet them as you would any new hire) can save you the time and money of searching for a new employee and the concern that your new hire won’t fit your company culture.

    When employees (related or not) share values, it’s often easier to work toward achieving common goals since they’re invested in each other’s success.

    2. Trust

    For small businesses to succeed, your team must trust one another. Family members have a pre-existing foundation of trust, and that attitude can spread to other employees, creating a strong team bond.

    Trust among your staff enhances communication, collaboration, goal-setting and decision-making. And 91% of business executives surveyed in PwC’s 2023 Trust Survey say maintaining trust improves the bottom line.

    3. Loyalty

    Employees want to work for companies where they know their opinions are respected. When your hire a relative of a current employee, they feel valued that you trusted their recommendation, deepening their loyalty.

    Family members likely enjoy working together, which further cements their loyalty to your business.

    4. Efficient communication

    Family members typically communicate more easily and effectively due to their familiarity and shared experiences. This streamlined communication minimizes miscommunications and misunderstandings.

    5. Lower recruitment costs

    Recruitment can be costly and time-consuming — especially today when many businesses compete for the same employees. Small business owners can reduce recruitment expenses, such as paying for job listings, recruiters or employment agencies, by hiring their kids or employees’ relatives.

    Also, since your children and the relatives of current employees are already familiar with your business, the onboarding process is shorter, reducing training time and costs.

    Related: The No. 1 Reason You Should Hire a Family Member

    The cons

    Of course, hiring family members can have some potential drawbacks. Here’s what to look out for:

    1. Appearance of nepotism

    Whether you’re hiring members of employees’ families or yours, other employees may resent these new hires, assuming they’re not qualified for the job. Transparency is essential. Tell your staff about the familial relationship and why you think the new worker will make a great team member.

    2. Preferential treatment

    It is critical that the new hire does not get preferential treatment. Family members should avoid inside jokes, telling secrets and any other behavior that would cause resentment.

    Job responsibilities, wages and paid time off for similar positions should be the same. Even a hint of special treatment will increase resentment in the rest of the staff.

    3. Emotional baggage

    Family members may bring emotional baggage and existing conflicts into the workplace, creating tension and making it difficult to work together. Those tensions can permeate throughout your company, negatively impacting growth.

    Regular communication is key to resolving family conflicts. The 2023 North America Family Business Report from Brightstar Capital Partners and Campden Wealth reveals that 49% of respondents experienced family conflict on the job, which for 41% resulted in a communications breakdown, impacting the entire company.

    Before family members join your company, you or your HR manager should set boundaries between the related employees (including you and your family). Explain what behaviors are not acceptable in the office. Consider adding a section about this to your employee handbooks.

    Related: The Do’s and Don’ts of Involving Family in Your Business

    Tips for hiring family members

    When hiring relatives, you need to:

    • Be clear about your expectations. Set clear expectations for the new hires so they understand their roles and responsibilities. When hiring family, it’s key to temper your expectations. Don’t expect them to be perfect or to think exactly as you do, and be patient. Give them time to adjust to their new roles. Also, if applicable, explain your expectations to the employee who suggested you hire their relative. If things don’t work out, you don’t want to lose your other employee as well.
    • Be fair and impartial. All employees should be treated equally. Favoritism is never acceptable.
    • Hire the best person for the job. Never feel obligated to hire relatives (your own or an employee’s) simply because they’re family. Make sure they’re qualified for the job.

    Before making a final decision, weighing the benefits of hiring family members against the potential drawbacks is critical.

    At my company, we have hired relatives of our employees and found that they work hard, quickly fit into our company culture and help us focus on growth and success. And while my kids work at CorpNet now, I don’t have unrealistic expectations. We’re not grooming them to take over. My children have aspirations and want to start their own businesses.

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    Nellie Akalp

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  • How to Sustain a Family Business Over Multiple Generations | Entrepreneur

    How to Sustain a Family Business Over Multiple Generations | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Preparing the next generation for leadership is one of the hardest parts of running a family business. Whether the company has been run for several generations or just one until now, knowing when to hand over the reins to the next leader is a challenge. Identifying the proper person for the task, and strengthening them for it, is something many family business owners grapple with during their careers.

    Of course, not every family-owned business has a successor to take on the leadership responsibilities of the organization. Some company founders may not have children or other relatives they can rely on to run the business, and in other cases, relatives have no interest in taking the helm of the company. Senior leaders with their leadership transition mapped out are at an advantage, but they often worry about their relative’s ability to handle the upcoming challenges they know will arise.

    That said, preparing the future generation for what’s to come is vital.

    Related: Your Family Business Won’t Survive If You Don’t Plan for the Leadership Transition

    People learn through experience, not lectures

    Think back to when you were a young adult, navigating the world outside your parent’s proverbial nest. You probably encountered several unexpected scenarios that have probably left an impression on you to this very day.

    Perhaps you bought your first car without any assistance and wound up with an expensive monthly payment at a high-interest rate because you didn’t understand the importance of building up your credit. Maybe you fumbled an early relationship or went overseas for the first time. Typically, these experiences make for memories that stay with us for decades, and all of them can act as learning experiences that we look to when we encounter scenarios that require us to act.

    While you may remember the countless talks your parents gave you, they likely didn’t resonate as a genuine experience might have. They certainly outlined the potential consequences of our actions, but unless you actively went against the advice, you likely never experienced the repercussions.

    As such, It can be tempting to swoop down and stop your child from making a decision you know will adversely impact them, but allowing them to experience the consequences makes them better future decision-makers, which will be positive for the family business.

    Related: A 400-Year-Old Family Business Remains the ‘Gold Standard’ in Its Category — Its First Women Leaders Reveal the Secret

    Give the next generation room to grow

    Lecturing the future generation on what it takes to run the business isn’t going to provide the outcome you’re looking for. Instead, up-and-coming leaders need to have their own experiences away from the company (and the eyes of their parents) to realize their capabilities fully.

    If “saving the day” is a sticking point for you, perhaps it’s time to let your children experience life outside of your constant observation. If they’re planning for college, for instance, promote universities that are out of state or overseas.

    It’s essential to allow the next generation to identify potential solutions to problems and try them out. Even if you know the solution won’t work, they’ll enjoy the excitement of bringing a new idea to the table and implementing it. They’ll have the space to grow into themselves and be better prepared to deal with adversity as a result.

    Allow your successors to develop their own identity

    A child or relative who grows up in the shadow of the family business needs time away to build their identity. The family name may be quite familiar in their local community. People will likely associate them with their parent’s name and the company, and sometimes, being the child of a family business owner makes it easier to find acceptance in prep schools and college.

    Pushing them to create their own identity by working toward a degree of their choice and joining clubs or activities that interest them is crucial. Don’t push your agenda; allow them to pursue their own identity.

    In addition, rather than hiring your relative to the family business fresh out of college, require them to work for another organization for a few years. Experience away from the family business will open their eyes to new ways of handling work-related issues that may benefit the family company in the future.

    Related: How to Successfully Prepare Your Family Business for the Next Generation

    Push character development activities

    People who always have someone there to “bail them out” are never given the opportunity to learn their capabilities. Whether you’re the founder of your family business or a second-generational leader, you’ve likely failed in some of your endeavors, and you likely remember your failures and what it took to overcome them quite vividly.

    Facing complex challenges and pushing through them is part of developing a solid sense of character. Rather than allowing them to give up and let someone else take on the task, future leaders must work through their hardships.

    Give your future leaders a chance to fail. As harsh as that may sound, they’ll learn that hard work and thoughtfulness are critical to overcoming obstacles and gaining the confidence they need to deal with future setbacks.

    Don’t hand everything over on a silver platter

    You’ve probably worked extremely hard to get where you are today, and you’ve just as likely seen significant successes, losses, and a bit of everything in between. You’ll want to ensure that your future leaders understand what you went through, even if they weren’t there to witness it in your company’s early days.

    Rather than handing your child the keys to your business outright, make them work for them. If you’re nearing retirement age and they’re unprepared to run the business, find another family member or a trusted external advisor to handle it for a while. They can mentor the next generation and move them along the succession path according to an appropriate timeline.

    It can be tempting to assume the next generation is ready to take over your company and allow you to enjoy your twilight years, but you must ensure they have time to develop skills and realize their identity. The best things in life come from hard work and determination, so give the future generational leaders of your company the space to build their character before bestowing the business upon them.

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    Shawn Cole

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  • Here’s Why Your Children Should Not Inherit Your Business | Entrepreneur

    Here’s Why Your Children Should Not Inherit Your Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    There are some astounding statistics surrounding family business succession. First, the average lifespan of a family-owned business is only 24 years, or roughly one generation. In addition, nearly 60% of family-owned businesses fail to make it to the second generation, while nearly 90% fail to make it to the third generation. Nearly half of the family-owned business failures were caused by the founder’s death, while only 16.4% of family-owned businesses failed after an orderly transition.

    As an entrepreneur, you can spend your lifetime building your business. It is a unique asset that represents a large portion of your legacy. Yet, almost instinctively, you probably treat your business the same as your other assets and ultimately expect your children to inherit it along with the rest of your estate. Doing so, as the statistics show, virtually guarantees your business will fail. While you could labor over trying to solve the riddle of how to properly hand over your business to your children in a way that defies the odds, perhaps the better answer is to not leave your business to your children at all. Statistics aside, there are a number of very good reasons why your children should not inherit your business.

    Related: Billionaires and Millionaires Who Aren’t Leaving All Money to Their Children

    1. They need to be free to discover their own life purpose

    Everyone has a purpose in life — some value that only they are capable of bringing to this world. Rather than trying to groom your children to fit into your business, you must allow them to be free to discover who they truly are and what their purpose in life is. If that leads them back to your business, then great, but don’t hold your breath. The likelihood that your children’s life purpose falls squarely in line with the business you have created is slim.

    2. The family business can lead to an unfulfilling life

    Ask a room full of parents what they want for their children, and you will overwhelmingly hear that they want their children to be happy and live fulfilling lives. Science now points to five factors in living a happy, fulfilling life: positive emotions, engagement, relationships, meaning and accomplishments (often referred to as “PERMA”). Pressuring your children to take over the family business or creating such expectations can result in resentment and other negative emotions, cause your children to become disengaged and uninterested in the family business, hinder your children from developing meaningful relationships outside the family business, not fulfill your children’s sense of meaning or purpose and make them feel like they have not earned their position. In other words, your children could land low on the PERMA scale and end up less fulfilled than had they chosen some other path.

    3. Mixing family and business is complicated

    Family dynamics are complicated. Too often in a family business, personal relationships can interfere with professional ones. Issues that have percolated at home can easily find their way into the office, which can result in unnecessary feuding. Further, your family members may have very different ideas on how to fundamentally run a business, leading to conflicts and disagreements. All of this puts a strain on the business and can ultimately lead to its failure.

    Related: Want Your Succession Plan to Succeed? Avoid These 8 Stumbling Blocks

    4. Nobody likes nepotism

    Giving your children positions of power within your business can be seen by other employees as nepotism. This can result in resentment and lead to a toxic work environment. It is better to promote from within the company based on merit, not familial relationship.

    5. Avoiding an inherent conflict of interest

    Your children are your heirs and the economic beneficiaries of your estate. However, a large portion of your wealth may be tied up in the value of your business. As beneficiaries, your heirs will likely want access to your wealth and liquidity, in which case they may be incentivized to sell the company against your wishes or maximize distributions, rather than invest in the company’s growth. This could ultimately lead to the demise of the business.

    Related: Succession Planning: How to Ensure Your Business Will Thrive Without You

    When it comes to family business succession and legacy planning, a key distinction to make is between economic benefit and managerial control. While you may want your family to ultimately benefit economically from your business and legacy, the truth is that they are often the wrong managers of your business and legacy. Rather than looking to your family to be managers, you should consider sticking to experts, professional advisors and key employees who are best qualified to run the business and ensure its continued success and growth for generations to come.

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    Daniel Scott

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