A family business is one of the oldest forms of businesses. It revolves around the members of one family, so it is an intersection of two organizations – the founding/ owning family and the business. The majority of the ownership lies with the members of the family such as spouses, children and parents, and relatives, who play the roles of stakeholders, managers, Board of Directors, advisors and employees.
The owners of family businesses usually pass ownership from generation to generation for decades which can be a blessing, as it brings such families closer in day-to-day life. It is generally accepted that family businesses are more resilient than most other businesses. This happens when the owners are committed to building up the business and passing it on to the next generation in a better condition than they received it. Such instances are perfect combinations of tradition and change. However, family businesses are not immune to problems. Here are a few challenges that are common in family businesses.
Accusations of nepotism
In family businesses, most of the time family members are given jobs based on their relationship with the owner. In such organizations that also hire non-family members, they will constantly feel the need to prove themselves over the ‘family heirs’, for fear that they might otherwise ‘steal’ the promotions or benefits the non-family member feel they deserve. To prevent this from happening, the owners should enforce policies that are fair by the non-family members. It is important that family members are not just parachuted into the leadership but gradually introduced to the business with a proper plan, and made to prove themselves as they grow. It is also important that new family members join the business with a good understanding of the business domain as well as the existing workforce.
Succession Issues
“Who is going to take over the company next?”
Deciding on this at the earliest possible opportunity leaves more time and space for the grooming of the successor. It will give them exposure to experience the culture and processes within the company and ensure a smooth transition. However, the members of the family and non-family members might face conflict.
“Are you going to put the family first?”
“Is succession exclusively for family members?”
“What value is placed on the qualifications and experience of non-family members?”
How do we deal with these issues? Here are few tips.
- Have a family retreat to discuss and agree all matters in a relaxed and undisturbed environment
- Prepare the new generation from as early as possible
- Having a meeting on a neutral ground
Separating Business from Emotions
Separating family ties from family business is almost impossible, which can have negative and positive consequences. For instance, if your family member is going through a hectic time, you might consider giving him / her more flexibility at work, which might affect professional decisions. If there is a mismatch of ideas between two or more family members, they might flare up randomly on vacations or even at the dinner table. If you own a family business, you need to realize the importance of setting sentimental attachments aside during working hours and keeping away from discussing work during family time.
Family businesses are the bedrock of the micro, small and medium enterprise sector – and many of the largest enterprises in the world started out, and some remain, as family businesses. This shows how vital and important they are, and the potential that these businesses have to offer. Managing family relationships, treating non-family talent fairly, and focusing on what is best for the business, all with a great deal of empathy for all parties, will help these businesses prosper.
