Define A Chain Of Command

Posted on Wednesday, November 08, 2017

Part of the responsibility of a good manager is to smooth over conflicts among employees -- yet that task can be complicated when running a family-owned business.

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 the rules.

The U.S. Small Business Administration studied family-owned companies and found they must deal with the dichotomy of workplace and personal relationships. At home, family roles -- husband/wife, parent/child and in-laws -- may be traditionally defined. Language is personal and attitudes may be more subjective.

Here are three basic tips that can help keep those relationships from interfering with work:

1. Leave it home. Determine that family matters will stay where they belong -- outside the workplace -- and reaffirm that decision often. This eases stress and lets all employees, related or not, understand their interests are best served by a profitable organization, rather than family allegiances.

2. Develop a mission statement. All businesses need to spell out their purpose and goals in a mission statement.

3. Establish a chain of command. Family businesses, in particular, need clearly defined lines of authority that must be respected.

The president of a small family-owned company is not necessarily the person in charge. The family elder may be president or chairman of the board, but daily management may be in the hands of younger relatives. No matter what the power structure is, there can still be conflicts.

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.

-- From the SBA Report, "Challenges in Managing a Family Business"

One solution: Hire an outside manager. Given the position of executive vice president or chief operating officer, this person would run the day-to-day show. A family member can retain the title of president or chief executive officer and maintain some authority.

The hired manager can not only act as a buffer between the family and the organization, he or she may have a better eye for the needs of the business. The manager should have the authority to make spending and other financial decisions so that the firm doesn't miss opportunities.

Hiring an outside manager leaves family executives free to work on future strategy, basic policy and growth.

A final note: Families often tend to talk about personal issues during working hours. Executives should set an example and insist relatives refrain from chitchat -- it's in the best interests of efficiency and productivity.

Posted in Tax And Accounting Topics For Business

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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