Who is Really in Charge of a Family Business?

* The president of a small family-owned company is not necessarily the person in charge. The family elder statesman may be president or chairman of the board of directors, but day-to-day management may be in the hands of other family members.

* The ceiling may be too low on the amount of money that can be spent without permission from too many members. Unrealistic or unnecessary clearance procedures may result in missed opportunities for increased profits, such as failing to take advantage of a good price on raw materials or sales inventory.

* Personalities and emotional reactions work against efficient operation. For example, even routine matters must be authorized by family members because Uncle Bill
never lets you forget your mistakes.

* Efficiency may be reduced by relatives' engaging in excessive family talk during working hours. The manager must set an example and insist relatives refrain from chit-chat on the job.

* Managers may owe their positions to their age or to the amount of capital they have invested and may lack leadership ability.

* Some family managers may hinder progress because they do not know how to listen.

Family members in charge of operations must be

* Capable of using efficient management techniques.

* Thick-skinned enough to live with family bickering.

* Tough enough to make decisions stick.

Definite lines of authority are essential when a member of the family manages operations and other relatives fill various jobs.

Family employees must discipline themselves to work within the lines of authority and the responsibilities of family members should be spelled out. Even then, it is wise to have a nonfamily employee highly involved in operations, to help resolve problems.

One solution to management problems is to let someone else -- a hired manager -- run the day-to-day show. The family member retains a title and some authority, but the hired assistant acts as a buffer between the family and the organization. The
assistant might be executive vice president or chief operating officer and the family member, president or chief executive officer.

With a hired manager, the family leaders are free to work on future strategy, basic policy and growth, while the nonfamily employee guides day-to-day operations.

The authority of the manager, whether family or nonfamily, to suspend or discharge flagrant violators of company rules must be clear. Management control is weakened if family employees are exempt from rules.

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