Operational Challenges faced by traditional family run businesses

This article was published on: 11/02/22 3:25 PM

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Operational Challenges faced by traditional family run businesses.


It is said that , ‘We don’t grow when things are easy. We grow when we face challenges.’Every business, no matter the format or industry, faces several challenges from time to time. There are problems related to securing capital, talent acquisition, team training, cash flow issues, increased competition, market fluctuations, consumer spending, and consumer behaviour changes, to name a few. But when it comes to a family business, there is an extended list of unique difficulties owing to family dynamics. In a family business, business decisions and emotions often intermingle, much to the team and the company’s detriment. 

Therefore, a sound understanding of the subtleties and nuances of how a family business operates can help put actions and strategies in place to overcome challenges proactively and avoid any future conflict.


 1. Generation Gap

When a business is being run by multiple generations of a family, work can be very rewarding but also challenging. Often, the founder of the company resists handing off leadership responsibilities to other family members, especially younger ones. The younger generation may have some great ideas on how things can be executed more efficiently with the use of new technologies. This can lead to conflict and frustration if employees feel their voices aren’t being heard or they are being held back.

Solution : Chances are that everyone has something to offer the business. A consolidated ERP software can practically incorporate nuances and modern ideas through technology so that all generations can see the difference in the business. Although older generations may be resistant to change, they should consider how to help younger members of the family become good leaders for the longevity and future success of the business .

 2. Your Business Culture

In family run businesses, it’s not uncommon for the company to take on the values of the owner’s family. Often referred to as “clan culture,” this environment, which is focused on tradition and loyalty, can make it hard for non-family employees to navigate. This can lead to high turnover rates but a decrease in productivity.

Solution : Keep all employees in the loop by properly communicating your company’s values during the onboarding process and then periodically. This will help everyone feel included—not just family members.Also all values, vision and mission statement should be in written format for clarity and focus.

3. Setting a fair Pascale and Benefits

Frequently this can become a bone of contention because the children of the boss, brother, or other family member will earn a higher rate of pay than other employees, regardless of his or her ability to do the job. This will not only lead to low morale but also cause you to lose efficient employees.

Solution : Assign compensation for each job individually and set the pay accordingly, regardless of whether it is being done by a family member or non-family member. All payscale and remunerations can be listed and entered as data in the ERP software by the H.R. department and solve this issue professionally.This will ensure equity in the process and will avoid resentment and turnover.

4. Mixing Business and Home Life

When family members work together, it can be difficult to make business decisions without personal feelings being thrown into the mix. Because of this, business talk can spill over into family events, making holidays and other occasions much less enjoyable.

Solution : Having all terms and conditions cleared in written format after unanimous decisions can avoid such conflicts. Rules of the company cannot and must not be deterred by anyone no matter who the person may be.

 5.  Levelling up standards

It’s easy to let things slide with family members. Maybe Uncle Ramesh is seriously late to work, or Cousin Naina spends more time in the break room than she does at her desk. But understand that not only does not ignoring these behaviours cause problems among other employees, it also enables offending family members to continue to do sub-par work without the consequences that you would likely hand down to non-family employees exhibiting the same behaviour.

Solution : Setting clear expectations and guidelines for each position from the start and making it clear to everyone what the consequences will be for unacceptable behaviour or low-quality work is essential. This way you are creating an equitable environment with clear guardrails to all employees.All work reports and productivity can be logged in the ERP software and used for later perusal during appraisals. 

6. Planning for the Future

Research shows that only about 30% of businesses survive through the second generation, and a mere 13% survive through the third generation. However, less than half of business owners have a solid plan in place for retirement.  This, of course, is setting the business up for failure in the event that something should happen to the owner.

Solution : Discuss your future retirement play with your family long before you plan on retiring. Determine who in the family wants to take over the business operations when you retire or pass away. Once you determine who will be in a future leadership role, begin involving those people in the day-to-day operations so they are well equipped to lead in your absence.Allowing the ‘new’ take the lead often results in opening gates for future success.Technology is the future. All family run businesses should be open to adopt a state-of-the art ERP software that solves all daily operational challenges while you can take entrepreneurial decisions.

Old age and death are inevitable.If there are no family members interested in carrying on with the business, make sure you have an exit plan in place. It is advisable to define what will happen when the owner is ready to retire or sell the business to avoid confusion and problems when the time comes.It is better to insure your hard -earned business for a better future now so that you don’t let it go astray in future.By adopting an ERP system, your company can streamline all the challenges and organise it for a brighter future prospect.

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