Family Business Management
Introduction
What is understood by the term ‘family business management’? Does it mean a business managed by one member of a family or by many members of a family who are retained in the business? It could be that all the family members who are part of the business have an equal share of the profits and therefore have an equal say in the decisions to be made in the business. Alternatively it might be that the family member designated as the Managing Director makes all the business decisions without necessarily needing to consult other members of the family.
However the business is organised, the understood idea of a family business is that it is owned and run by a family, and members of that family work together to make the business successful. There are many variations of how the management of the business works, but ultimately it is a privately owned company and all the profits are retained for the benefit of the business and the family.
Managing the Family Business
A family run business has many complicated dimensions to the interpersonal dynamics compared to a public company that can make or break the owners. The dynamics of personal and professional issues combined create an added pressure which can hinder good business decisions. Unresolved family conflicts will undoubtedly be carried into the workplace and impact the motivation and productivity of everyone involved.
I have current experience of managing a family business where we find it is important to have our different areas of responsibility. I am the Managing Director and main Project Manager, then we have the Accounts and Admin Manager and the Chairman who presides over the meetings and keeps an eye on the overall direction and functioning of the business. We have found over the years that there are some important issues which have to be resolved in order to work compatibly together. Mainly they are the issues around boundaries. Respecting each other’s different skills and trusting they can do their job well are key elements. If there are new skills to learn fundamental training is offered to ensure that person can do the job effectively.
It is important to realize managing any business in today’s environment is a complicated process but when you have the added dimension of family dynamics it can so easily get out of hand. One of the crucial elements to resolve is the historic patterns of relating between family members. Usually there is a lack of awareness that these patterns exist because they are habitual and familiar. However once they start to impact on the effectiveness of the business these issues need to be reviewed so that changes can be made and the issues resolved. One obvious example is where a child works with a parent. It is usually difficult for the parent to see the child as a responsible adult and still treats that person in the old habitual way. The child might then feel devalued, disempowered and impotent because of the old habit of respecting and obeying the parent. This will produce a lot of frustration, anger or even rage generating manipulative and destructive behaviour.
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Other members of my family are crucial in the freelancing business that we run, especially since we recruited sales agents so as to acquire extra interested clients. With me as the lynch pin of the team it has obviously meant we have had to resolve a lot of old family issues.
Leadership
One of the prime issues in a family run business is that of leadership. There has to be a leader whom everyone should be able to respect and is capable of making sound business decisions. If two family members are in a power struggle to be the leader then the business will suffer. I have seen this happen in a firm that was not between family members and it nearly brought the company down. Loyalties become divided and business decisions are often made for the wrong reasons resulting in loss of production and revenue. So when embarking on a family business the leadership needs to be decided at the outset. Once the decision has been made then the rest of the members working in the company need to support that decision and not undermine it.
There are different styles of leadership:-
The Autocratic Ruler -This sometimes works as long as the rest of the family are willing to do what he/she wants. But long term I don’t think the autocratic ruler is particularly good for business. When the time comes for someone else to take the helm there could be no one strong enough to fulfil the role.
An example of autocratic leader is the father of a family friend who was a successful plastics manufacturer. The son was encouraged to follow a path of water ski trick jumping and became a member of the British team. His father did not encourage him to continue in further education with the belief that the son didn’t need it as he would run the firm after him. The day came when the son could no longer continue with his sport because of injury and settled down the work in the business. After about six months he had a big falling out with his father and left. The problem then was he had no other skills options open to him other than selling insurance. After about 3 weeks he returned to work in his father’s business because it was very lucrative and had a level of status for him.
The Democratic Ruler – will encourage each individual to speak about their area of responsibility or their view of a business strategy. All members will be listened to respectfully and their view considered. This way a full and fruitful dialogue can take place in order to find the best decision for any one topic. New or younger family members will be supported to learn the business and encouraged to broaden their outlook so they become another valuable asset to company.
If the autocratic father had been more far sighted and encouraged his son to further his education, then find work with another firm for a period of time and left him the option to come and work in the company when he had gained experience elsewhere, he would have benefitted from a more mature, confident, creative and experienced manager who could have brought new ideas to the organisation and participated fully in all aspects of the company policies. The son’s enthusiasm for modern technology could move the business forward into the modern age.Before any children of a family business are eligible to take over, a policy of working with another company for at least two years would benefit the succession in the long run
Conflict Resolution
Family businesses can be a minefield of unresolved conflict and resentment. It is important to find healthy ways of resolving conflicts before even embarking on the path of family business management. When we first set up together in our family business we agreed that if we were not happy with some behaviour or something that was said, then we would say how we felt and give the other person the opportunity to change it in some way. The most important thing for us was to listen to each other and respect the other person’s point of view. So when difficult decisions needed to be made to ensure the survival and the profitability of the business, discussion and argument, chewing over the policies and relevant information were signs of healthy processes on which to base sound business decisions.
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Attitudes and Values
Being part of a family business means for the most part the attitudes and values are shared. In a regular company there are many diverse attitudes and values which generate tensions when working together. Listening and understanding each other is Key to good working relationships. One of the benefits of having a family business is intuitively knowing the other members and being able to trust them with your life if necessary. Even if there are disagreements you will know exactly the integrity and reliability of each individual. (Or not as the case may be!)
Well Known Family Businesses
When looking at the commercial world there are hundreds of family run businesses both large and small. Some are very well known companies such as the Ford, Murdoch and the Mars family, others are only known locally like my family butcher. But whatever their size there are only a small percentage of businesses which have been successfully passed down through the generations.
Rupert Murdoch the son of Keith who started the original newspaper empire in Australia, has built up a huge global network of media and entertainment companies worth millions and is still in charge at 77 with his son James as a possible heir. In the case of Ford the family now in the fourth generation own 40% of the voting stock but Mars is still 100% family owned and is not floated on the stock market. Frank and Ethel Mars started the company in 1923 and were responsible for inventing the Milky Way Bar. Their Son Forrest argued with his father and the story goes that his father gave him a significant sum of money and said ‘go and run your own company’. He came to England and set up the factory in Slough making Mars Bars, later branching out into make pet food (Pedigree Petfoods) based in Melton Mowbray. His sons John and Forrest Mars Jr, were educated and trained to take over the business. When old Mr Mars retired he set up a small company making specialist chocolates so he would be kept busy while his sons got on with running the global business.
My local butcher Robert inherited his shop from his father who inherited from his father. The instigator had two sons who worked in the shop and now their sons run the business together which is still organised in the traditional way. It is very successful even during these times of crisis. The most famous family firm in the UK of course is the Royal family who live and work the business for life.
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There is an enormous list of larger family run businesses in the world. Often the instigator of such family firms build up the business from the ground and once they become very successful the parent hopes the children will carry on the business. Sometimes this happens, but more often than not the children show very little interest in working as hard as their parent. They do not seem to have the motivation or drive to carry the business forward and often do not have the talent of the parent.
A good example of this is the Mower family that produced the Neways products which they sold via multi level marketing across the world. They had seven children and the father, who was an industrial chemist, developed a skin product for his wife who had always suffered badly from Acne. Once he started doing research into products available in the stores he discovered that they were full of chemicals that, as a chemist, he’d had to wear protective clothing when handling because they were considered dangerous. From this beginning he developed other health supplements and through the network marketing they became so successful they made millions of dollars. The children of the family having worked for a time in other companies came in to join the family firm. The maintained they would always keep the company in the family and it would never be floated on the stock market.
However as is the way of the world, success spoiled them. The parents suddenly separated and divorced. At first they announced they would continue to run the company together but in the end they sold it to a group in the Netherlands who now run the company. Although the Mower children had worked outside the family firm I always got the impression that they did not manage their departments particularly well and showed none of the talent and drive of either of the parents.
Inheritance
It may be important to tackle the issue of succession in the business especially if the owner of the business has more than one child. In many cases it is predictable the children will fight over the ownership of the business if it has not been made clear who will inherit. There may be a temptation to skimp on education thereby limiting the development of the successor. To avoid these kinds of situations one idea is to eliminate the feelings of entitlement. It might be just a matter of planning. Having a defined succession guide will enable the children to earn the right to succession and find their effective roles enabling them to work harmoniously together in the business.
Conclusion
Running a family business can be a rewarding and satisfying occupation with the added bonus of working in a familiar environment where trust is implicit. However family conflict will inevitably affect working relationships so it is preferable and healthy to separate business from personal matters. This allows the business owner to make decisions with less bias and more flexibility for the betterment of the company.
Even if all the members of the family do succeed in having a good business relationship, living separate lives outside of work with exposure to a greater variety of ideas and stimuli, which family members can bring to the workplace, will be of benefit. Probably the most important thing in managing a family business is ensuring that the whole family have a good relationship that will last even if the business doesn’t. Ultimately, blood is thicker than water and family is more important because the business can be replaced but your family cannot.