Springfield, Massachusetts (PRESS RELEASE – April 12, 2010) — Who’s the boss? A popular 1980s television comedy first asked this question, and just like in that show, the answer in many family businesses isn’t as clear as you might think. But unlike the sitcom, the mix-ups that can ensue in real life cannot be fixed in a laugh-filled 30 minutes.
Family members who operate businesses together say that knowing – and agreeing – who’s in charge of what is a key to success, according to a 2009 study, FamilyPreneurship(SM): What Every Entrepreneur Should Know before Starting a Business with a Family Member, commissioned by Massachusetts Mutual Life Insurance Co. (MassMutual) and conducted by Harris Interactive. Moreover, avoiding second-guessing is critical. Without agreement on who’s the boss, decision-making can grind to a halt and the business can become paralyzed, respondents said.
“It’s important so you don’t butt heads One of you has to make a decision and you have to stand by it,” said one respondent, who co-owns a restaurant with her sister.
While formal ownership agreements, titles and job descriptions might seem like obvious fixes, less concrete issues are at the heart of the matter, according to the survey. Family business owners say trust and taking advantage of each family member’s unique strengths are two of the top three factors influencing family business success. The third is having passion for the business.
“The issue of who’s in charge of what often sorts itself out naturally, with owners gravitating to the areas that they like best, but that’s not always the case,” said Beth Wood, assistant vice president of Business Market Development, MassMutual, and a former family business owner herself. “It’s extremely important to have these conversations openly, to identify the areas that each owner will be responsible for, and then to trust each other to make good decisions.”
Clearly defining roles and responsibilities can eliminate potential conflicts, she added. For example, 56 percent of respondents say they do not share a role with other employees.
But just because roles and responsibilities are clear doesn’t mean that others don’t have input into decision-making. Collaboration is common, according to the survey. Nearly three-quarters (73 percent) of respondents said that key business decisions are usually discussed between at least two people before a decision is made. Overall, 68 percent of respondents said their decision-making process is effective.
Not all family businesses find communication to be so easy, however, Respondents who said their businesses suffered from ineffective decision-making said the top reasons were stalemates between partners, overly emotional debates, and a lack of decision-making speed.
The findings should be a wake-up call to family business owners or those who are thinking of opening a business with family,” said Wood. “To help the business succeed, you have to put aside any territorial disputes and make decisions that are in the best interests of the company,” she said. “Sometimes, it helps to have an outside expert’s perspective, such as that of a Certified Family Business Specialist* or a financial professional who has been trained in the unique issues and dynamics of family businesses.”
Learn how MassMutual helps entrepreneurs meet their business needs; visit massmutual.com/smallbusiness. Find a financial professional or Certified Family Business Specialist* (CFBS) to help with your business insurance needs; visit massmutual.com/home/locateoffice. Search for an office in your area, and ask for a business specialist to contact you. For more news about MassMutual, visit massmutual.com/news.
*The Certified Family Business Specialist program is offered by the American College in Bryn Mawr, Pa., exclusively for MassMutual financial professionals.
FamilyPreneurship(SM) is a two-part study of focus groups among small business partners, and an online survey. Six focus groups were conducted by Harris Interactive on January 29, 2009 among 6 separate pairs of family business owners. Participants met the following criteria: all own a business with a spouse, sibling, or immediate family member, have between 1 and 500 employees, have been in business for at least five years, and earn a total annual revenue of $1 million or more. The survey was conducted online within the United States by Harris Interactive on behalf of Massachusetts Mutual Life Insurance Company between March 6 – 20, 2009 among 518 business owners, among which 330 are involved in a spousal business relationship and 250 are involved in a business relationship with a family member other than a spouse. Respondents met the following criteria: all U.S. residents, age 18 or older, have between 1 and 500 employees, have owned their business for at least five years, and have annual revenue of $500,000 or more. Results were not weighted. No estimates of theoretical sampling error can be calculated; a full methodology is available.
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, Inc., member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.