KANSAS CITY, MO. – There are plenty of good reasons for making a successful business start-up a family affair but passing the torch from one generation to the next without careful planning can have ripple effects that strain relationships and impact the bottom line. In this week’s MEAT+POULTRY podcast, Craig Aronoff, PhD, co-founder and senior advisor with The Family Business Consulting Group, based in Chicago, talks about the pros and potential cons of bringing family members into a business. Often, having the same last name as the founder of a company isn’t enough to warrant bringing the founder’s relatives into the business.
“It works best when you simply recognize that a business is a business and that is a different thing than a family,” Aronoff said.
A family member joining a family business is often more likely to be successful if the incoming spouse, son, daughter or brother brings value to the company, which includes having some other work and life experience and, ideally a college education. Aronoff recommends family members not only work for another company first but earn at least two promotions to give them credibility before coming back to the family business.
Aronoff also discussed the importance of establishing ownership of the company for incoming family members. Agreed upon responsibilities of owners need to be clear to management, board members and other owners in the family business, whether they are within the family or outside owners. Especially in companies that have multiple owners, a board of directors can play an important role in holding owners accountable. Boards can also help ensure more seamless leadership succession, career advancement and adherence to shareholders agreements, Aronoff said. These issues become more complex the bigger and more successful a business becomes.
“As I’ve said many times, family businesses are complicated,” Aronoff said.