Managing family dynamics

Lots of machine shops, including mine, are family-owned businesses and share a unique ownership arrangement. This can make the experience of operating a shop interesting, challenging, and, hopefully, rewarding. Family-owned businesses are an important part of the U.S. economy and often involve multigenerational ownership. They are a testament to the American dream.

With so many machine shops being family owned, interfamily relationships directly affect their success or failure. With sizable financial investments at stake, it’s vital that family members understand their roles and respect their shop’s chain of command, because any infighting can put serious strain on the relationships inside and outside of the company. That’s not a good way to experience family life.

Many ways to structure a family-owned shop exist, and the family, aided by a reputable lawyer, should determine the best working arrangement. Many factors can influence a shop’s legal structure, such as whether it is incorporated, whether the property is leased, rented or owned, and the formality of the ownership agreement. Regardless of the exact legal arrangement, a family-owned shop is more likely to succeed if family relationships are solid and supportive.

Unfortunately, that’s not always the case. The managers of a family-owned business must consider the relationships involved and avoid jeopardizing the quality of life of the family members. Don’t risk family relationships over a business partnership.

Machine shops continue to struggle with a lack of qualified employees and can’t operate without loyal employees from outside the family. However, some employees are ambitious and need a reason to continue to devote themselves to a company, especially when it’s sewn up as a family enterprise. The more ambitious ones get restless if they don’t see a clear path of advancement. This often leads to employees leaving and becoming competitors. While this is unavoidable in some cases, all family-owned shops must recruit, cultivate and retain nonfamily employees and give them a reason to stay with the company.

The family must understand this fact and respect all employees, instilling confidence that their loyalty will reap rewards. Ultimately, this involves sharing the wealth outside of the family. Everyone in the family has to agree on how that is handled or at least respect the family’s ultimate decision maker.

Then there’s the sensitive subject of family members’ salaries. Does everyone in the family get to know who is making what? I’ve been handling our shop’s payroll, including family members, for a few years and it’s never been too difficult. The bottom line is my parents sacrificed much in life to build a high-quality shop and provide everyone with a decent living. As a result, they pay themselves whatever they see fit. As it turns out, in recent years, it’s made more sense for them to reduce their income to lower their tax burden, transferring some of that income to their sons.

One of the joys of a family-owned company is that it’s OK to share in the success and experience it together. There’s something to be said for a worker who rises from the bottom in seniority and pay scale—family member or not. I certainly did. However, having a sibling making a higher salary than I did when I was at the same career point isn’t unfair. Rather, it’s a reflection of our shop now being in a better economic position. Fighting over money strains a family, and is exactly what you want to avoid.

Any machine shop presents significant financial risk for the owners. But when family members are on the same page, the shop they own can operate with a common goal and produce amazing results. CTE