Family businesses are an undeniable force on the global market. In the United States, roughly 90% of all businesses are family owned or controlled, and in the EU, family businesses provide up to 50% of all private sector jobs. 

Despite the critical role they play as job providers and growth drivers, family businesses are vulnerable to a specific set of challenges that are unique to this company type. When family-owned companies aren’t prepared to take on these challenges, it puts the organization’s future at risk and damages their chances of success in the long term.

In order to help your family business maintain its upward trajectory, we’ve used this post to detail some of the most common mistakes made by family-run organizations. With these expert insights, you’ll be able to set yourself apart from the rest and get your company on the path to lasting success.

Not involving the right people

People are at the center of any business, and this is especially true with family-owned companies. It’s not uncommon for family businesses to make the mistake of assuming everyone in the family will want in on the venture, and that non-family members should be kept at a distance.

This dynamic causes a few issues. For example, it might lead you to bring in a family member who isn’t motivated or passionate about the business. And, by keeping non-family members out, you could be passing up on professionals that could help your business get to the next level. 

To guarantee success in your business, you need to make sure that you have the best people at the helm. This means hiring new members based on qualifications, their experience and what they’ll bring to the company rather than focusing on family ties.

Relying on outdated mindsets

Change is the only constant in today’s increasingly competitive marketplace. In the context of this global landscape, it’s dangerous for family-owned companies to rely on tradition and once-successful growth strategies when doing business. Past success can often lull us into a false sense of security, and prevent us from updating knowledge in pursuit of future success.

With this in mind, it’s crucial for family businesses to develop a growth mindset. To do so, company leadership should explore innovative strategies and business models in order to prepare for new challenges. By becoming more dynamic and building a growth environment across your organization, you’ll be taking steps towards a sustainable success model.

Failing to shape effective governance structures 

Governance structures are the backbone of any organization. Without this structure, companies become vulnerable to a variety of factors, such as weak oversight, unclear role definition, or insufficient structural transparency. This is particularly sensitive in the case of family businesses, where it’s all too easy to blur the lines between personal dynamics and business decisions. 

A well-designed, straightforward governance structure will not only prevent conflict at the executive level, but it also contributes to a more transparent, pragmatic approach to decision making. Defining the expectations and responsibilities of the different roles within your organization will provide individuals with a clear understanding of their reach and limitations within the company.

Taking the next step with IE’s Family Business Program

More than just another company, a family business is a journey. The Family Business Program, designed by IE Business School and Aalto University, is a 10-week program where leading entrepreneurial experts in Madrid and Helsinki share key insights on unlocking your family business’ full potential and driving cross-generational success.

Learn more about avoiding family business blunders with the next Family Business Program intake, starting on September 30. Click here to find out what our program can offer you.