Ideas & Stories

Working with Family Members

It usually starts out when the founder’s spouse (usually the wife) helps with the business accounts.  Or the teenage children need cash and help dad out in the office, warehouse or in the factory during school vacations.  Such is the beginning of many of the world’s millions of family businesses.

Successful family businesses can see many family members interacting with the business in many capacities: from employee to manager or one day even director, from current owner to future family owner or direct family member to children’s spouse or even in-laws.  Moreover, the most successful family businesses move from generation to generation.

Why then are multi-generational family businesses so rare?  Why do so few make it to the 2nd generation let alone 3rd or 4th.

There are many reasons but central to this is the dynamics of the family business itself.

On one hand, the business is a tough environment.  It must be competitive, profitable in the medium to long term and deploy the most effective resources to meet the needs of an ever-changing world.  Many successful family businesses need to treat their family members in a similar manner to outsiders in respect of employment, salaries, promotion and roles. Firm but fair.

On the other hand, the family is a compassionate environment.  Forgiveness, equality, encouragement, fairness, loving values and sharing are paramount.  These attributes can be in conflict with the competitive business life requirements and demands of enterprise.  A family business that lives by family values alone rarely thrives.

However, those family businesses that adapt the best of family attributes into the working lives of their family members are the ones that thrive.  They are financially successful, but not at all costs.  Tolerant of family members, but patience has its limits.  Fair in remuneration, but within ranges and boundaries.  Open to equity transition but not as assumed right and at no cost.

Conflict arises when these two systems clash, as they almost always will.  It arises in perceptions of effort and reward between siblings, the influence of spouses over working and non-working family members, opportunities given to some and not others and arises in dealing with matters of discipline and the role and influence of outsiders, advisors, senior management and the independent board or managers.

The trick is to put these components together using the family’s values and vision for the future and underpinned by a written creed of how and why the family system works in with the family business.