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Unique challenges of the family business

Sunday, February 9, 2014
Business Eye

Jai Leladharsingh (MSc)



Neither families nor business are static. While the family and the business contain many enduring structures that resist change, each system also experiences continual change and evolution. In fact, many thought leaders have characterised family and business as “co-evolving systems.” Every individual, the family as a whole, and the business are all continually growing and changing, as is each individual’s relationship to the business.


The growth of the individual is biological, as people move from infancy, through childhood, and into maturity. There is also the psychological dimension, as family members of all ages develop their capacities and take on various life tasks. There are slow changes, as well as crises and sudden shifts such as when a child leaves home or there is serious illness. 


In the same way, growth of a family business is organic. In other words, the business grows, over time, through the resources provided by the owner(s), for example financial resources or by deliberately increasing market share. Also, issues such as hiring non-family members to fill key senior executive positions within the business and defining their levels of empowerment can be quite challenging, and must be very carefully managed. 



Business is a continuation of family
In most cases, a family business is frequently put together and grows without much thought. Upon inception, someone conceived of a product or service, made it or delivered it and made a profit. A generation ago, almost all small businesses worked in this way. 


The world was much less complex and this worked fine for a small- to medium-sized business. But today’s demands for fast growth and rapidly changing conditions, coupled with the emerging needs of individual family members, and the eroding effects of time, give new importance to discovering the dynamics behind the business’ structure. 


Let’s take a common example of two brothers running a store. The store is so successful that other family members get recruited to work there, such as a sister and a cousin. Systems are improvised. As the business grows, everyone is provided for. But nothing remains the same for long.



Eventually a crisis intervenes. It may take a business downturn, a serious conflict between the two brothers, the opening of a second store, and the question of which brother will manage it, or whose children will work in that store. The change creates a crisis, which the emotional resources of the family are not able to solve. Both the business and the family suffer. 


What needs to be understood is that many family businesses are an extension of the family. That is why critical business decisions are taken within the family group. Or why most family businesses have no organisational chart. Or why the father makes decisions from his house even though he is retired and his son is the managing director. Or why people go to the mother to get the father to change his mind.



Or why the daughter-in-law, who may hold a mid-level administrative position, is attending all the business meetings. There is no business reason for any of these facts—but the family has its reasons. These have to do with the history and style of the family, its personal traditions, needs and patterns. 


Many businesses take on the feel of the family. The energy level of employees, the kind of corporate culture that is prevalent, how employees are with one another, whether people will co-operate or become disruptive, even the office layout and types of furniture, come with the style of the family. 


Take for instance, one of the significant family-owned financial institutions in America which was founded by a happily married couple; let’s say Mr and Mrs Jones (real names withheld). One day a major potential customer visited the corporate headquarters and placed a cup of coffee on a desk. A loans officer told the customer, “Sir, Mrs Jones does not want cups on the desks.” 


As this story demonstrates, in addition to taking on the fiscal and management style of the Jones’, the company has taken on some of their personal values as well. The corporate office is in some ways an extension of their living room. While this may not happen in non-family companies, when a family is in charge, the style of the business is even more transparently derived from the family’s style. 


When someone, either professional or non-professional is employed in a family business, it is highly recommended that you take some time to understand the family. 


Take a look at how the business was founded, the values that the family demonstrate, understand their expectations of their employees and more importantly, comprehend how your relationship with each family member will be defined and shaped. It must be stated that it is the family who breathes life into the business and they are in effect the creators of patterns that affect the business in a very significant way. 



References: Working with the Ones you Love by Dennis T Jaffe


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