Running a family business can be a rewarding endeavor, but there are also many challenges involved. Let’s look at how clearly defined roles and responsibilities can help your organization run more smoothly.
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Importance of structure in a family business
Setting clear roles and expectations is one of the biggest challenges family-owned businesses face. That’s because there’s a tendency to fill these roles based on family relationships, not the business’s needs.
This dynamic can result in family members taking positions they aren’t qualified to fill. Or there may be a lack of clearly defined roles and boundaries, with a few people taking on the responsibilities for multiple jobs.
This lack of structure can breed resentment and conflict that will spill over into family life, and it will also hold your business back. The right organizational structure gives your business the framework it needs to succeed through different generations and leadership changes.
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Organization structures for family businesses
Here are a few different types of organizational structures you can choose from:
- Flat: A flat organization is self-managed and doesn’t emphasize hierarchies or job titles. The goal is to empower each employee to make decisions and take responsibility for their part in the company. This structure can enable faster decision-making and higher levels of productivity, and it’s best for small to medium-sized companies.
- Functional: A functional organization divides up the company into different departments, with one person running each department. Each employee is responsible for different tasks and has to report to a manager. These types of organizations can be more efficient, but decision-making often takes longer since there are more people who need to weigh in.
- Divisional: A divisional organization is a company where each organization is centered around a different product or customer base. For example, Amazon offers retail services, cloud computing services, advertising, and logistics. Each of these is a separate brand, all operating under one organization.
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Family businesses may need specialized roles within the company to achieve certain objectives.
Types of business roles
The organizational structure you choose will depend on your company’s size, industry, and goals. Within that structure, you’ll have a variety of different positions, and each one will have a specific set of responsibilities. Here’s an overview of the different types of business roles:
- Executive roles: Executive-level positions include titles like the chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), and chief marketing officer (CMO). These individuals operate at the highest level of the company and are responsible for strategic planning, leadership, and vision setting.
- Managerial roles: Managers are responsible for overseeing a specific department within the company, like sales, human resources, marketing, or IT. For example, a human resources manager is responsible for onboarding and training new employees and resolving conflicts in the workplace.
- Operational roles: Operational roles include jobs like administrative assistants, bookkeepers, and sales reps. These individuals are responsible for many of the day-to-day functions that keep the business running.
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Essential roles in a family business
For a family-owned business to function properly, each person should understand their responsibilities and the role they play within the company. Here are the essential roles that should be defined for family businesses:
- Ownership: It’s important to choose the ownership structure that works best for your family business. For example, ownership can be limited to one owner or couple, or you could set up a partnership agreement.
- Board of Directors: It’s a good idea to have a board of directors that is responsible for overseeing the management team and providing guidance. You could also opt for an informal advisory board instead.
- Family Council: A family council is a leadership and governance forum that exists to help family members make decisions and achieve business goals.
- Specialized roles: Family businesses may need specialized roles within the company to achieve certain objectives. For example, you could have an individual in charge of conflict resolution, succession planning, or leadership transitions.
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