One of my favorite stories about Yankee catcher Yogi Berra is one about him going into a pizza shop and ordering a pizza to go. The proprietor asked Yogi if he would like pizza pie cut into 6 or 8 slices. Yogi replied 6 because he was not that hungry!

Families grow faster than business

For many family businesses, families grow faster than business. Their business is like a pie that is being cut into smaller and smaller pieces. This can end up with more family members in business than what business can afford to employ. Often this creates a situation where none of family members are making a decent living; or where, because of a lack of re-investment (machinery, trucks, computers, etc) in business, business loses its competitive advantage in market place.

Hiring strategies for family members

To avoid this problem, we recommend that family businesses develop hiring strategies for family members so that only those family members who acquire a skill or expertise that business needs are invited to join business.

Kemba Dunham, a writer for Wall Street Journal, said she could understand strategies for family members in business, but what about other family members. She posed a very interesting question to me – "What can non-employee family members contribute to family business?"

GREAT QUESTION! We went on to discuss two very successful strategies we have used with our family business clients.

Create a family foundation

As a family business expert dealing with growth and profitability issues, I receive many requests for interviews from writers and editors preparing family business articles for newspapers and magazines. They generally expect me to blame usual line-up of culprits that prevent growth and profitability, issues such as: cash flow; insufficient capitalization; product quality and reliability; customer service; management infrastructure; communication; management alignment; employee empowerment; planning - just to name a few!

Having worked closely for more than three decades with family businesses, in my opinion most critical impediment to successfully growing any kind of business is responsibility diffusion. And larger business grows - larger problem becomes!

With family businesses, responsibility diffusion can occur because of overlap of roles between family members who work in business and those who do not. Family dynamics that can influence responsibility diffusion include:

Family dynamics and responsibility diffusion

Fear of causing hurt feelings

Sibling relationships defined by birth order, gender and education

Lack of knowledge or understanding about some segments of business

Lack of formalized communications, meetings and infrastructure

Fear of being disrespectful

Lack of training in working together as adults thereby creating a tendency to revert to parent and child roles in making decisions

Perceived lack of economic parity gained from business by family members

Examples of influence of responsibility diffusion abound in almost every element of a business. In recent years, many business experts have focused attention on level of "service" a business provides to both its internal and external customers. "Service" assessments of a business can provide an interesting platform to discuss responsibility diffusion because discussions can cascade into so many crucial elements of a business. Some elements of "service" include customer service, customer care, customer relations, sales, and business development.

"Poor service" can be measured by many factors such as a reductions in new customer acquisitions, reduced repeat business from current customers, demands from customers to reduce price because of service related issues and most generally, a high level of frustration by customer constituency.

In operational assessments we conduct, we find that there is almost always a direct correlation between service issues, other problems associated with responsibility diffusion and lack of a system for ensuring accountability throughout business.