THE BLOG

Family Businesses Are the Worst Companies

08/14/2013 10:40 am ET | Updated Oct 14, 2013

Douglas McIntyre reported in on the three worst publically traded companies in this HuffPostLive segment.

Based on employee and customer reviews, the crappiness comes from:

• Long hours.
• Low wages.
• Interaction with customers who don't like their products.

Makes sense. However, the companies on the list (Dish Network, Corp. is #1) are a cake walk compared to working for your spouse, partner, dad, mom, brother or cousin. Family businesses are the worst.

Where else would one work for NO pay? Add to the long hours by incessant talk at home, at the dinner table and in bed? Where else would you put up with someone who shows up late, maybe high, and hasn't taken a shower (the son of boss)? Oh, and how stressful is it for everyone when Mr. and Mrs. Business Owner give conflicting directions... then fight about it in the break room. Ugh.

When it's good, it's very very good.

The best companies I know are family businesses and the worst companies are family businesses. When it works, you have aligned team members building on solid, functional, trusting relationships. Communication is streamlined. People are respected and allowed to let loose with their unique gifts. The chain of command is honored. Family members take pride in going the extra mile, demonstrating that they deserve their positions. And there is a legacy of opportunity and wealth.

When it's bad...

When a family business doesn't work, it's awful. Unresolved family issues ("Dad always liked you best!") sabotage communication and production. Unqualified offspring are hired and are given a pass when it comes to policies and procedures. It's confusing and disheartening for non-family members in the business. They walk on eggshells and wonder, "Who's going to be in charge today?" or, "Where can I go in this company if my name isn't their name?"

What often happens when it is time to pass it on? The parents "sell" the company to the children. Perhaps this includes an even bigger salary (retirement living) for the first generation, burdening the next generation. The parents may continue to counsel the new owners with limiting advice, like, "You can't raise your prices. You'll go out of business." The first owner failed to create a fortune with the business, and now his children are "enslaved," trying to please daddy and prevented from making any profit-building changes. Ugh.

We can fix the family business. And it's vital that we do so.

A family business can expand prosperity, opportunity and be a wonderful environment for personal development. It allows you to spend time together, working on common goals and having fun. (NOTE: The Duck Commanders.)

Do hire your kids. Even little buckaroos can help out at the shop... stuffing envelopes, sweeping up, washing trucks, entering data. Hold them accountable. Everyone fills out a timecard. Performance appraisals are based on production, not last name. Be sure to spend time training them on the whole operation. If Bobby Jr. is dumping trashcans all day, he might not see the big picture. Commit to their business literacy. Show them numbers. Have fun!

Today, big companies - like the ones on the Worst List -- are bulldozing local, family businesses. Differentiate yourself from them in order to survive. Why would folks choose your company over the others? Because you are a family-owned company that cares for its customers. Can't you hear them? "Oh, I always call Arnold Plumbing. They are so reliable! My mother used to call Arnold Sr. Now, his son is the only person I let touch our pipes." Big companies will never match your ability to develop a personal relationship.

When you are operating a sound business with solid earnings, you could pass your successful business on to your kids. What nicer inheritance than a cash cow business that requires thought, planning and right action to make it work? You can create a legacy...or expand one into another generation.

Let's fix the family business. Here are 5 ways to do it...

1. Expect no more and no less from family members than you would from any other employees.

That takes planning. Gather the family members and key employees. Write down what you want... as a family, as a business, as individuals. Regarding the business, discuss... who does what. Why. Who wants what you have to offer. How much to charge. How will you market and sell it. How will you make good on your promises. What actions will help you do this. Put the pages in a binder. A business plan helps you all get on the same page.

2. Do what you want to do, regardless of what the rest of the family wants you to do.

I asked a young fellow recently, "Do you like being the service manager at your company?" He responded, "Well, my dad wants me to be the service manager, so I guess I like it." I laughed. He didn't. Don't sacrifice your life for the family business. If you choose to go to New York and be in the chorus line in Cats, do it. The family will get over it. Dad will find someone else to be the weekend dispatcher.

3. Match compensation to performance, not DNA.

As each generation increases geometrically it can get crowded on the salary line of the income statement. I'm all for putting Mother on payroll. After all, she's been a saint. Reward her for years of selfless dedication while y'all worked yourselves crazy. But don't overdo this. If you pay more to relatives who don't work at the company than to the employees who do, you may be heading for trouble.

Conversely, paying family members too much is the exception. More often, hiring family is way to get free or cheap labor. Lots of business owners claim, "I can't afford to pay someone so my wife does the bookkeeping". Yikes! Price your services to cover generous compensation for all performers... related or not.

4. Decide who will be the boss.

For fear of stepping on anyone's ego, family business members can coast along aimlessly. ONE person must accept ultimate responsibility for the leadership of the company. You can still work as a team and support each other, but choose a 'buck stops here' person. Somebody must make the final call when it comes to a split vote. Create an organizational chart and line up the reporting relationships.

5. Bury the hatchet.

Family businesses can breed grudges. I know a fellow, Steve, who bought his company from his dad. He felt he over-paid but felt weird negotiating with his dad. Then, his dad started a competing business in the same town. That's cold. They were estranged for a while. Steve finally called him up and asked him to meet for lunch. "Here's the deal, Pop," Steve said, over burgers. "I'm over it. I'm letting this go... all this anger and frustration. Just wanted to let you know." Steve paid the bill and left. He told me later that he walked back to his office feeling 100 pounds lighter. "And the weird thing is, the anger seemed to leave my dad, too. We haven't had a cross word since. I also realized that he wasn't the reason I was successful or unsuccessful in business. My dad, well, he's my dad."

Don't wait for him to change. Don't wait for her to die. Decide now that you are going to live your best life, and -- perhaps -- create your "best" family business.

For more on functional family businesses...