Introduction

Innovation is often defined as the multi-phase process of generating and adopting new or improved products, services, processes, or structures to adapt to dynamic environments. Innovation is essential for all firms in order to remain competitive.

But the successful navigation of the innovation process is not easily achieved among family firms. While most stages of the process present difficulties, the initial adoption phase is among the most important. One key means of enhancing the success of innovation within family firms is to assess readiness prior to beginning the innovation process.

Readiness for Innovation in Family Firms

By conducting an examination of the family firm's underlying readiness for innovation, family managers can better understand how the firm is positioned to move through the innovation adoption phase. If executed with care, the likelihood that the process will proceed efficiently can be greatly improved.

The Readiness for Innovation in Family Firms (RIFF) framework allows family managers to assess the extent to which the firm is prepared to adopt and incorporate any new innovation, and takes into account the specific characteristics of family firms

The framework consists of structural and psychological factors.

Structural factors represent the basic building blocks that are necessary for innovation readiness, and include aspects like ownership control, family commitment, and alignment of existing knowledge, skills and abilities with regard to the new innovation.

Psychological factors, on the other hand, reflect the extent to which members of the family and firm are cognitively and emotionally inclined to accept, embrace, and adopt an innovation.

Among these factors are innovation appropriateness (acceptance among the family that a specific innovation is correct for the situation) and innovation benefits (shared belief that the innovation aligns with the family’s overall goals and aspirations).

Implementation

With an understanding of key structural and psychological factors, assessing the appropriate factors within the framework at the appropriate time can be a critical aspect of innovation readiness, as successful adoption is influenced by accurately diagnosing and addressing the appropriate issues at the appropriate time. The firm's readiness can be evaluated through a sequence of assessments: initiation, decision making, and experimentation.

In the initiation phase, family leaders must first recognize the need and importance of innovation. During the decision-making phase, structural factors related to the family and firm should be considered in addition to the psychological factors related to the family. Foremost, family owners' control and established direction are key structural factors. Other details, like ownership, managerial involvement, and board representation should be decided at this stage. The final stage of innovation adoption, the experimentation phase, is contingent on psychological factors.

Some of the most radical shifts in management style and organizational structure have evolved out of the experimental phase of innovation adoption.

Innovation is not limited to products and services; some of the most radical shifts in management style and organizational structure have evolved out of the experimental phase of innovation adoption. One example is W.L. Gore & Associates (the creators of Gore-Tex) who conceived of a provocative company structure connecting every individual in the organization to every other, in an informal network that allowed free flow of information without layered management.

This was only possible after a shift and alignment of psychological factors among the family and all of the firm's stakeholders.

Implications

Innovation is widely accepted as the primary path to sustaining competitive advantage in both family and non-family firms. Family firm leaders may improve their ability to successfully adopt innovations by understanding innovation readiness. That understanding is derived from an understanding of both the structural and psychological factors that influence the family, individuals within the firm, and the firm itself.

The RIFF assessment framework, which describes a sequence of three phases within the innovation adoption stage, can benefit family owners as they attempt to lay the groundwork for innovation within their own products, services, and business models.

Source: http://cmr.berkeley.edu/browse/articles/58_1/5806/

Handing down the family business can be a delicate affair. We've all heard the stories. Parents who won't let go. Children not ready for the job. Dysfunctional relationships both at home and in the office.

The hardest part about having a family business is the challenge of passing it down to the next generation, says Eric Clinton, director of the Dublin City University Centre for Family Business.

He cites research from the Kellogg School of Management near Chicago that about 30 per cent of family businesses will survive from the first generation to the second. Only 12 per cent will survive from the second to the third.

What can families do avoid becoming a statistic? A large part of the answer, it seems, is regular communication about what will happen when the older generation is no longer in charge.

Have the difficult conversations early

"Family businesses are a lot like life, like relationships," says Clinton. "If you want it to work, you have to work at it.

"My advice is to have the difficult conversations and have them early. Have regular communication. Talking over the kitchen table at 8pm on a Saturday night might not necessarily be the healthy way to do it."

Preparing the next generation early on in the process is crucial in case of unforeseen events like a sudden illness, he says. If children have to take over earlier than expected, things "can become very dysfunctional very quickly".

"How do you mentor the next generation into it?" Clinton asks.

"Do they have an adviser? Do they shadow the incumbent? It's not just about giving the next generation power, it's about giving them ownership and control and mentoring. They can't just be thrown into the role."

Clinton teaches families about the "4Ls", which are phases of the family business life cycle: learning business, learning our family business, learning to lead our business, and learning to let go of our business.

The first two phases are about apprenticeship.

Clinton says families might bring in rules or a "constitution" that require the next generation to reach a certain level of education and/or outside work experience before joining the family company.
According to the 4Ls, business owners should "learn to let go" through planning: developing a timeline for retirement, creating management development systems and sticking to the plan.

Succession can actually be a breath of fresh air for businesses, according to Clinton, as long as there is a balance between tradition and change.
"Succession is often a time for innovation because the next generation often comes in with new ideas. The next generation gives energy and lifeblood to the business."

Principles of succession

"Succession issues are probably the most difficult topic because there are no black and white solutions. A wide array of issues could arise in one family," says Suzanne O'Neill, a partner at Irish accounting and business advisory firm Baker Tilly Ryan Glennon.

Baker Tilly's client base is predominantly family businesses, and O'Neill specialises in succession planning.
Family businesses need a structured approach to succession, she says. The results of a study by Baker Tilly International, which surveyed 1,650 business owners across 55 countries, were condensed in to eight principles of succession.

They are meant to be a practical guide for families.
The eight principles are:

1. Succession is not retirement

2. Start with readiness

3. Set your goals before the journey

4. Price is not first

5. Harmony is a must

6. Plan early, start earlier

7. Equality of, not equal

8. Ask before you get lost.

Family harmony is an important issue on the list, O'Neill says.
"The whole issue of family harmony certainly comes up in dealing with clients. The key requirement in any succession is harmony and open communication. All relevant parties have to be engaged in the process at an early stage."

She says the owner should bring the next generation on board so they are comfortable with the plan from the start. Owners should also be willing to listen to everyone's point of view. These are ways to avoid "disharmony".
Part of the process is identifying the family member or members who should take over the business and to start handing over responsibility so they have the opportunity to demonstrate their abilities early on.

O'Neill calls these "stepping stones" that should be put in place well in advance of retirement. Aoife and Paddy Hayes of CST International 'It wasn't a 'someday this will be yours, my daughter' type thing' CST International is a small, Dublin-based market research agency run by Paddy Hayes (69). His daughter Aoife (33), head of client services, will soon take over, and the pair appear to be getting a lot of things right in their succession planning.
"I started the company about 20 years ago, and it's my third business," Paddy says. "So I'm 42 years signing my own paycheck." But Aoife might sign a few before the end of his 43rd year.
While Aoife began helping out at the office as a teenager, she says her path was not laid out for her. She worked in the arts for a few years and then did a master's in project management.

Taking over the business became an option after she went to work there full-time four years ago and saw how she could drive the company forward.
Paddy says it was her call. "It wasn't a 'someday this will be yours, my daughter' type thing. It was very much: go to school, go to college, do what you want to do. And then, if you feel it's something you want, that's grand."

CST specialises in guest feedback for the hospitality industry, and Aoife is now spearheading a new aspect of the business: employee engagement research. CST puts together surveys to figure out how engaged a company's employees are.
"The more engaged you are, the more willing you are to go the extra mile," says Aoife. "We feel like we're providing companies with really useful data that they can use to make their businesses more successful."

Father and daughter talk about the succession regularly, and the handover is about three quarters of the way done. It has happened in stages. This year, for the first time, Aoife went to an important meeting with their largest client without Paddy.

"That was conscious and deliberate," he says. "But that's what you have to do, and that's not easy because I would have loved to be there.
"When you are the founder of a business and you attend these meetings, just by virtue of [your role], you tend to dominate and people tend to address questions to you because you're the founder of the company.

"If you're going to give other people space, then you have to give them space," Paddy adds. "And a way to do that is by not being there.
"She was coming in and working with people who were used to working with me, and that's tricky. And that's something she has managed extraordinarily well. She's extremely good with people . . .

So I think she has a lot of the skills that will be needed to take this business where it can go." Paddy will be available after he steps down, but he says he's ready to move on. His first book, Daphne Park: Queen of Spies, a biography of a British spy, will be published later this year. He is already working on a follow-up.
"Your early 30s is a super time to take over the running of a business," he says. "Why wait until your 40s, 50s, 60s? Do it now . . .

You have that great combination of energy and drive, tempered with maturity."

Source: http://www.irishtimes.com/business/work/playing-it-straight-in-family-business-succession-1.2203869

Small businesses have it rough. They're particularly vulnerable to fraud because they lack the resources to implement complete systems of internal controls and properly.

segregate accounting duties among their limited staffs. However, small businesses don't have to be rife with fraud. Here are some viable prevention options.

Bob and his brother, Bill, owners and operators of Acme Tractor for 30 years, were close to retirement. A local bank had continually financed Acme, which had an inventory of farm tractors worth millions of dollars. The owner's wives, Jane and Julie, shared accounting duties in the company. Jane would approve invoices. Julie would prepare the checks and either Bill or Bob would sign them. The receipt and payment cycle included a series of checks and balances with no one employee responsible for the entire cycle.

Jane and Julie retired from the business, and James, Bob's son, assumed the bookkeeping responsibilities. James, 30, had been working in various jobs at the business since high school. Now the brothers entrusted him with all aspects of bookkeeping for the business: accounts payable, accounts receivable, payroll, and all account and bank reconciliations. They gave him check-signing ability and a business credit card.

Soon after becoming the bookkeeper, James married and began a family. As his personal monthly bills increased, he found it difficult to maintain the lifestyle he had known when he was single and living with his parents.

The fraud scheme began simply. At first, James began illegally using his business p-card (or purchasing card) for small personal expenses, such as gas for his personal vehicle and fast food meals. After several months, his charges for personal expenses increased in number and dollar amount, including charges for taking out his wife and children to fine restaurants, clothing for himself and his family, and even high-end electronic products. No one at Acme noticed the continual increase in charges for personal items because James controlled all payment checks to the credit card company.

James' fraudulent activities expanded. He began embezzling from the payroll system. Because he was a manager, he didn't have to use the time clock and began to pay himself for excessive overtime pay. He would give himself paychecks in lieu of not taking vacation time, even though he took all his vacation days. Acme management was still oblivious.

He then began writing checks payable to himself, but he would write a regular recurring vendor's name on each check stub and hand-key it into the computer system. When the bank statements came each month, James would alter the images of the checks on the statements to match the vendors on the check stubs and in the system. Then he would hide evidence of the fraudulent checks he had cashed by photocopying the altered pages of the bank statements and shredding the original statements.

Crafty James wasn't done yet. He opened a new personal credit card at the business' bank. Now it was easy for him to electronically make bank drafts for paying the business' monthly credit card statements and then write company checks to pay his personal card. If anyone reviewed the check stubs, it would only appear that one credit card invoice had been paid each month. James could charge the company's credit card for his personal expenses and charge additional purchases to this new credit card. He used company funds to pay off both cards. Sweet deal.

Some fraudsters rationalize their thefts as "temporary" loans they will repay later. James executed his frauds without any intention of returning the money. His thefts from the company for 2½ years were large enough to create company cash flow problems.

One of James' cousins accidently discovered the crimes in December 2010 when he was searching the business' online banking system for a canceled check and discovered that several checks in one month had been payable to and signed by James.

Management didn't contact law enforcement nor engage an outside accountant. During its internal investigation, the family determined that it had lost at least $60,000 (though it was probably quite a bit more than that). Family members confronted James. He confessed and explained how he had stolen the money. The business fired him after he signed an agreement for restitution, which stipulated that the family wouldn't prosecute.

Before they discovered James' crimes, Bill and Bob had attributed cash-flow problems to a downturn in the economy. And James, of course, concurred. The brothers had to lay off employees and cut or reduce employee benefits for both family and non-family employees. The company still hasn't recovered from James' fraud schemes.

Small businesses are particularly vulnerable to fraud because they lack the resources to implement complete systems of internal controls and properly segregate accounting duties among their limited staffs. Therefore, accounting personnel may be tasked with completely inappropriate job functions that provide easy opportunities for committing financial frauds. Furthermore, the business cultures of small businesses are developed around a concept of a "trusted family" of employees. Consequently, placing trusted employees in positions without proper internal controls doesn't appear to be an unreasonable decision to managers of a "family" business.

According to the ACFE's 2012 Report to the Nations, estimated median losses for small organizations — those with fewer than 100 employees — that experienced a fraud were $147,000. The report indicated that small organizations are the most common victims in fraud instances at 31.8 percent — the highest rate of any business size category. (For example, organizations with 100 to 999 employees had a fraud incident frequency of 19.5 percent; 1,000 to 9,999, 28.1 percent; and 10,000 plus, 20.6 percent.)

The five most common fraud schemes for organizations with fewer than 100 employees in the ACFE report were: billing fraud, corruption, check tampering, skimming and expense reimbursement fraud. Corruption schemes deal with crimes such as bribery, illegal gratuities and kickback arrangements. The largest number of perpetrators in the entire study, 41.5 percent, had been with the organization between one and five years, most of them had a college degree and worked in the accounting area.

Even using ACFE survey data, it's difficult to estimate the true losses from employee frauds. Small businesses often don't report these crimes because of families' embarrassment, decisions not to file criminal charges or wanting to keep knowledge of the crimes privy. Only a small number of small business embezzlement victims — roughly two percent — report crimes even though 40 percent of small businesses report they have been victimized, according to the May 16, 2011, article in The Daily Record, "Employee theft at small business high and hard to detect," by Kathleen Johnston Jarboe (accessible for a fee).

In this article, we provide several practical recommendations for small business managers to help them prevent these fraud schemes.

THE TRUSTED EMPLOYEE

Employee thieves normally don't fit the stereotypical career criminal profile. They often are in good standing, have worked with a company on average of four to five years and nine out of 10 of them are first-time offenders, according to the January 2011 article, "Opportunity Knocks," by Brian Shappell in Business Credit magazine (available only to NACM members).

Approximately 87 percent of the occupational fraudsters studied in the ACFE's 2012 Report to the Nations had never been charged or convicted of a fraud-related offense, and 84 percent had never been punished or terminated by an employer for fraud-related conduct. Consequently, the most trusted employee — who has easy access to funds and has never stolen anything — may yield to the overwhelming temptation to take company resources when he or she is faced with personal financial stress. Donald R. Cressey's well-known fraud triangle highlights factors such as personal stress (what he called "perceived non-shareable financial need" or pressure) that contribute to the implementation of a fraud scheme. (He said the other two points of the triangle are perceived opportunity and rationalization. See the ACFE's 2013 Fraud Examiners Manual, 4.502 – 4.504.)

The motives for committing a financial fraud include greed, financial pressures or employee disenfranchisement. Disenfranchised employees become resentful after spending years handling mundane details for their employers without recognition, according to "The Downside of Good Times," by Anita Dennis in the November 2000 issue of Journal of Accountancy. They feel forgotten.

Other employees are motivated because they believe they're entitled to more financial compensation. They also rationalize they'll only "temporarily" borrow the money, and they'll return it later. Motive, rationalization and opportunity work in combination to increase the potential for employee fraud in any organization.

In many small businesses, the major reason fraudsters can commit their crimes is because management trusts them so much; they're family members or longtime friends, or they have proven work records and years of service, according to "The Trust Factor," by George A. Cassola in the Managerial Auditing Journal, volume 8, 1993, issue 7. That high trust level enables fraudsters to hide their activities. Even when business owners find suspicious behavior, they often believe it's inconceivable that employees would violate these trusted relationships. So, consequently, they hesitate to investigate, which results in much larger frauds

Thanks to Tricia O' Sullivan and Conor O' Sullivan for sharing this great article with us.

Source: http://www.acfe.com/article.aspx?id=4294976289

This question goes to the heart of family business philanthropy. And it's central to our latest study, which surveyed over 500 family businesses globally and found what makes them engage in giving.

We discovered that philanthropy plays a big part in bringing different generations closer together and that the founder's values are crucial. And there's a growing emphasis on social impact investing, which is the newest form of giving.

Investing in impact

We found that family businesses apply a portfolio approach. They invest in several forms of philanthropy at the same time. Providing services to the community is the most popular, followed by monetary contributions to charities. Next, though, comes social impact investing – targeting specific social objectives while earning a financial return.

It was interesting to see that more than a third of all family business owners, and a half of all large businesses, said that they're "highly engaged" in social impact investing. More than two-thirds say they're already involved in some way. I see these levels of engagement going higher in the years to come, in family businesses throughout the world.

Looking to the legacy

The study also revealed that family firms have a holistic perspective, centered on the founder's vision. Many family business owners pay particular attention to the past and cherish the business's heritage. Nearly 90% of sixth-generation family members agree that their philanthropy should be in line with the founder's values. I think that this sense of identity is very powerful and informs the social and environmental causes the family supports.

What's more, there's a positive relationship between the owners' wish to pass on the business to the next generation and their philanthropic giving. Owners who are concerned with the future well-being of the family are more motivated to address the long-term social and environmental issues in the world outside.

Government incentives

Family businesses adjust their portfolio and their chosen investment vehicles according to the local cultural and legal context. Government support is a decisive factor here. In countries where our respondents believe there are tax benefits for charitable giving, family businesses are more likely to engage in philanthropy.

In particular, there should be more tax breaks to encourage impact investing. The UK has extended its social investment tax relief – I'd like to see other countries follow suit. We need enlightened policymaking.

The next chapter in philanthropy

But where is family business philanthropy heading? In my view, families are united in their search for effective solutions. That's reflected in the high levels of personal involvement, which are greatest in small family firms and in the larger businesses. They want to be as close as possible to their favored causes.

And it's why families evaluate their philanthropy very carefully. There's room for improvement, though – nearly 60% of owners would like to have a sharper focus on their projects' effectiveness. They want to know about the connections they're making, the problems they're helping to solve and the positive impact they have on the world.

Family business philanthropy is all about forging relationships.

It's a long-term social investment with a clear family identity and a strong value base.

https://familybusinessblog.ey.com/2016/06/07/how-can-a-familys-values-be-transformed-into-social-impact/#more-926

Sustainable and successful family businesses tend to have strong governance. One important prong in their governance models is a board of directors. As featured in our report, Staying power: how do family businesses create lasting success?, nearly 90% of the world's largest family businesses have a functioning board.

A strong board helps reduce the risk of nepotism, internal conflict, inequitable allocation of ownership shares and succession woes. And well-functioning boards diligently monitor performance and draw on the industry knowledge gained through the years.

Unfortunately, a board made up of only family members can experience governance issues due to the unique dynamics of family relationships. But independent outsiders can help family members navigate idiosyncratic personalities and the family dynamics that can impede smooth succession and sound business decisions.

For family businesses to make the best decisions regarding leadership, purpose, business strategy and succession, they need to be able to reflect. Personal interests and feelings often cloud that reflection.

Independent directors can provide the needed clarity as well as a fresh perspective. Since they are not part of the family unit — or a friend or paid advisor — they can bring the necessary objectivity to the difficult decisions, particularly those regarding strategic initiatives and management roles.

Independent directors help balance the family's desires with the fiscal needs of the business, a key component to a lasting legacy. Their responsibilities span from mediating shareholder differences to identifying new growth areas. They offer expertise and knowledge that the family management team may be lacking, and they can shed light on areas the family may have never even considered.

Because of the pivotal role independent board members play, family businesses should take great care when seeking out such advisors. Recruitment should focus on the specific capabilities and experience the company needs, such as work in a related field, experience in assisting with succession plans, a strong financial analysis background and more.

The goal is to find a candidate who can help balance the family's expectations with realistic objectives — someone who can assist the family with making decisions based on market insight, objective data and sound principles. The ideal candidate will be an independent outsider with no other ties to the company so he or she can make recommendations without fear of repercussions.

Independent directors of family-owned companies provide more than business intelligence. They:

Serve as coach, counselor and peer advisor

Consider how strategic and operational recommendations, such as succession planning and dividend policy, affect family dynamics
Place the enterprise on a path to a strong legacy for future generations
Family businesses should strive to add independent outsiders to their boards of directors.

The objectivity, clarity, and valuable insight they bring to the table can help create a long lasting legacy.

Source: https://familybusinessblog.ey.com/2016/05/05/balancing-the-family-business-board/ 

Members involved in the Family Business: 

Paddy Founder, long retired

Stephen Current CEO,

Paddy’s Son Dominic Group Manager

Emilo Part Time Coordinator

Rachel Looking to join the business

Philip Doesn’t work in the business

Sofia Doesn’t work in the business

Bringing a family member or friend on board as a business partner may seem like a fine idea, but the relationship can prove tricky to navigate--or to end, if things don't go well. "It's easy to get into business, but it's hard to get out," says Wayne Rivers, president of the Family Business Institute, a consulting firm based in Raleigh, N.C.

That means you need to take a step back and think carefully before partnering with a friend or relative. Here are 10 key questions to consider:

Are we in it for the same reasons?

Be clear about your goals. Do you want to expand your business and eventually sell it, or build something your family can pass down? "The mistake is not being clear about what your intentions are," says David Ransburg, a consultant with The Family Business Consulting Group, Inc., based in Chicago. If you don't have the same goals for the business, you'll have a hard time making plans or coming to a consensus on big decisions.

What is this person bringing to the job?

Don't let your relationship color how qualified and well suited for the job your potential partner might be. Think about the credentials and level of commitment you would expect from anyone you were giving such a key role in the company. You may want to write a job description with qualification requirements and see how the experiences of a friend or family member measure up, Rivers says.

Should you offer an equity stake in the business?

You need to decide whether you want to offer your new partner an equity interest in the company, and if so, how much and how soon. Not only do you want to be sure a potential partner can add value to the business before sharing ownership, but you also should consider giving the person an interest in the business over a period of time, say five years, rather than all at once, says John Davis, faculty chair of the Families in Business Program at Harvard Business School. It can be easy to deal informally with family and friends, but you want to make the terms clear in a signed shareholder agreement.

What will happen when we can't agree?

Resolving conflicts with family and close friends can be particularly challenging because personal feelings can easily get mixed up with business decisions. "With friends and family... you might make more knee jerk reactions," says Ira Bryck, Director of the UMass Family Business Center in Amherst, Mass. "You can be your worst self where you need to be your best self." You will need to figure out a way to remain professional by taking personal feelings out of decision-making and focusing instead on objective measurements and standards.

How in sync is our risk tolerance?

Despite your personal connections, you and a family member or friend may feel very differently about taking risks. For example, an older sibling who saw his parents take many risks when starting the family business might be more willing to take risks himself than a younger sibling who got involved later when the company was more established, Bryck says. Determine how in sync you are on such vital decisions as launching new products or trying out new forms of advertising. While you can certainly disagree from time to time, you don't want to constantly butt heads.

What will each of our roles be?

In a 2010 study of 518 family-owned businesses, the most successful ones had made each person's role in the company clear upfront, says Tracy Shaw, assistant vice president of business market development at MassMutual Financial Group, which oversaw the "FamilyPreneurship" study. For Lidia and Uli Fluhme, married founders of Gran Fondo NY, which began running an annual 110-mile cycling event in New York in 2011, the division of labor has been clear from the get-go. While Lidia Fluhme takes care of logistical aspects of the event, her husband is responsible for interacting with cyclists and handling marketing and legal matters. "He's the visionary, and I'm the implementer of what happens," she says.

How will we keep our personal and professional lives separate?

When working with family or close friends, the boundaries between your personal and professional lives are bound to blur. But you can maintain some work-life balance if you establish a few rules. For example, you might agree not to discuss work during family meals or to talk about personal matters at work only in an emergency.

How will this person be evaluated?

Family and friends tend to sweep a lot of things under the rug in business rather than addressing them, Rivers says. But you need to hold one another accountable and figure out how you will evaluate each other's performance on a regular basis. If providing feedback, especially criticism, seems too difficult given your personal relationship, you can seek out a third party for the assessments, Rivers says.

If it doesn't work out, what do we do?

It isn't unusual to want to change your career, but when you're in business with a close friend or family member, you might feel you can't leave because it will hurt your personal relationship. Before asking a family member or friend to become your partner, consider what might happen if one or both of you wants out. How will you handle the exiting partner's shares? Who will take over the responsibilities of the departing partner? What will this do to your personal relationship?

What will our succession plan look like?

Even if you both plan to stick it out for the long haul, you're still going to have to think about your successors. Unfortunately, succession planning often goes unaddressed because it suggests mortality, illness or other unpleasant life events you'd rather not discuss. But failing to address succession planning "is like getting on a plane with a pilot who hasn't learned how to land the plane," Bryck says. "You really need to sit down and have this difficult discussion."

Source: https://www.entrepreneur.com/article/225613

Working in the family business can be fraught. When your manager is also your parent, sibling, or another relative, how do you keep things professional? Do you ask to be treated the same way as others, or accept that you will have a different sort of relationship at the office? Do you publicly call your mother "mom," or your father "dad"? And what about getting candid feedback for your own growth and development?

What the Experts Say

People who successfully work with family often say there is nothing more fulfilling or enriching, says Claudio Fernández-Aráoz, a senior adviser at the global executive search firm Egon Zehnder and an expert on family businesses. These people "consistently speak of a much greater sense of purpose and meaning in their lives," he says. But if something goes wrong, the damage can be devastating. Fallouts with family over work can cause a tremendous amount of anger, sadness, and shame, says Rob Lachenauer, CEO and cofounder of Banyan Family Business Advisors. "When ordinary people get fired, they get another job," he says. "When a family member gets fired, they feel they've been fired from what they were born to be." Here's how to effectively work alongside relatives.

Work somewhere else first

Experience in an outside firm should be a requirement before embarking on your career in the family business, says Lachenauer. You'll get invaluable training, improve your business judgment, and build your confidence. You'll also gain much-needed perspective on what you hope the arc of your career might look like. Starting off elsewhere is critical "not just because of what you will learn in terms of capabilities," says Fernández-Aráoz, "but fundamentally, in getting to know yourself" and understanding "what you want to do as you get older."

Create separate spheres immediately

On day one when you return to the family business, set a boundary between family time and work time. Letting the two bleed into one another is a recipe for conflict, says Lachenauer. You don't want to talk about clients at Sunday dinner, or about family drama at the office. "Thinking physically is very useful," he says. "When you are in the office, you are business people. When you are on the ranch, you are family." Create house rules about which family matters are permissible to talk about at the office and vice versa. It can be helpful to note which hat you're wearing before embarking on a conversation. For example, you can preface a discussion by saying, "I'm talking to you as your son right now, not your employee." If you feel your family member isn't respecting these boundaries, "bring it up privately and immediately," says Lachenauer.

Define your role and career path

Make sure you have a crystal-clear understanding of your job description and that others know what role you fill. That way you'll avoid needlessly stepping on colleagues' toes or giving anyone the impression that you're resting on your laurels. Be transparent and proactive about your expectations and goals for the future, especially if you would like to hold the top job in the future. "Succession between generations is a very risky project," says Fernández-Aráoz, which is why it's critical to talk early and openly about rules for advancement and what handing off power might look like. "Recognize you may get more opportunities than others," Lachenauer says. "Acknowledge that, and then work your butt off."

Adopt an office voice

Pay attention to the details of your interactions with family. "Language matters tremendously," says Lachenauer. Actively listen and use a professional tone with one another — that way you don't make others feel excluded by your closeness or cause unnecessary squabbles when boundaries are breached. Lachenauer recommends you not call each other by nicknames at work, as it "can signal to other employees that the family relationship takes precedence." But strike the balance that feels right for you. "You don't want to behave artificially," says Fernández-Aráoz. If calling your mom by her first name feels too awkward, for example, don't strain to do it, but consider using her given name when discussing her decisions with colleagues.

Seek independent feedback

Getting candid input when you're the boss's son or daughter can be difficult, if not impossible. "Assume you won't get good feedback," Lachenauer advises. He suggests participating in the standard review process but always supplementing it with outside evaluations to ensure that you learn and grow on the job. "Ask for 360 reviews or employ a coach," he says. The key is to be proactive, adds Fernández-Aráoz. "You cannot wait for top-down guidance." One smart strategy is to tap an independent board member to evaluate your progress and performance so you can get smart career advice and reviews.

Have a backup plan

When your professional and personal lives are intertwined, your own identity can be overtaken by the daily demands of family and work. For your sanity and future success, it's critical to maintain outside interests and contacts of your own. That might mean dedicating time to professional networking and enrichment groups so that you keep up with business contacts and develop new skills. It might also mean carving out time for personal hobbies or taking vacations without the extended family, so you have some breathing room away from the business. And as much as it might pain you to consider, think regularly about a Plan B, in the event the family business — or your place in it — hits tough times. "Have an exit plan," says Lachenauer. "Then it won't be the end of the world if it happens."

Principles to Remember

Do:

Get experience at an outside company first to improve your judgment and boost your confidence.
Be proactive about asking for candid feedback from someone outside your family.
Have a Plan B.

Don't:

Bring family nicknames into the office. Maintain a professional tone whenever possible.
Completely meld work and family. Keep the two worlds separate.
Let yourself be coddled. It always ends badly.

Case Study #1: Work elsewhere before climbing the family ladder

Toby Bozzutto's father, Tom, never asked him if he wanted to work in the family real estate management company. But after a few disillusioning years in the music business, Toby wanted to do just that. Tom was surprised at the request but agreed on three conditions: "I had to go work for someone else first," says Toby. "I had to get a master's degree in real estate development. And I had to start at the bottom."

Toby did everything his father asked, joining The Bozzuto Group in 2001 as a development associate. He eventually headed up the company's development business before becoming the company's president in 2013. "I was tremendously concerned that people would think I was entitled or only there because of nepotism, and subconsciously it made me work twice as hard," he says.

Tom and Toby made sure to stay focused on business while at the office. "I didn't have a direct line to him, and he didn't seek me out," says Toby. "It was exceedingly rare that we talked about our family life at work, and if we did, we did it away from everyone else."

Early on, they also attended a weeklong seminar at Harvard University that focused on leadership transitions. "One of the things we learned was that I should never report to my father," says Toby, "and that I should be treated the same as anyone else."

"When you begin to work with your family, the trajectory of your relationship changes," he adds. "For us, it has been so rewarding and enriching. But it's hard because business is so deeply intertwined with the personal."

Toby says he'd be thrilled if any of his three children express an interest in joining the business. But until then, "I'm going to mimic my dad and never bring it up."

Case Study #2: Set clear expectations from day one

When it was clear that Teddy Winthrop was growing dissatisfied with his career at an executive search firm, his brother Bayard offered him some advice. "He told me to figure out what I was passionate about, to start learning about business, and to become interesting to people who might want to hire me," Teddy recalls.

This prompted something of an epiphany. Bayard had recently launched American Giant, a U.S. manufacturer of high-quality hooded sweatshirts sold directly to consumers. Teddy admired the organization's mission and reinvention of the retail supply chain, so he went back to his brother and told him, "I want to work for you." After mulling it over for a week, Bayard agreed to hire Teddy as an operations coordinator in the rapidly growing startup.

"From the beginning, I was concerned about favoritism," Teddy says. But Bayard made it clear that Teddy would be receiving no special treatment. Teddy explains that on his first day of work, the two sat down together to set clear expectations: "Bayard said, 'As your brother, I want you to learn from this experience. As your boss, I expect you to run through walls for me.' The separation of the worlds was there from the beginning."

Bayard also told Teddy's supervisor to give him very direct feedback. "That honesty allowed me to excel," says Teddy. "I knew when I was doing a good and bad job." He also benefited from monthly evaluations where he would rate his own performance and colleagues would offer anonymous feedback.

The experience Teddy gained at American Giant proved invaluable when he decided to strike out on his own with a new idea. In 2015 Teddy launched his own company, Edward Field, which also sells American-made products: innovative wallets that hold smartphones. He credits Bayard's no-nonsense leadership and advice with helping to inspire him.

"Setting expectations early is one of the most important things when working with family," he says. "Separating work from home is key so you can have a healthy perspective."

Source: https://hbr.org/2016/06/keeping-it-professional-when-you-work-in-a-family-business?utm_source=dlvr.it&utm_medium=twitter