Setting up, growing and sustaining any business is a challenge. For family businesses, however, there is another layer of complexity – the family. Recognising and addressing the need for a family strategy to reinforce and enable the business strategy is key to sustainable family business.
Although collectively referenced as ‘family businesses’, the family connection is about as far as it goes when it comes to being able to classify this type of business as a ‘type’. Family businesses come in many different guises, ranging in size from micros to giant multi-nationals, and in geographical scope, from firmly local to those with a global footprint.
Their family business connections and the relationship between the business and the family also contribute to a diverse picture. At one end of the spectrum there are businesses that see family involvement in the business as an asset, and actively encourage the blurring of the lines between the two. At the other end are those who firmly believe in separating business and family, and they work hard to protect the business from the family (and perhaps the family from the business).
As successive generations are incorporated into a family business, the overlap between family and business becomes ever more complex. Over the generations the owner-managed business can start to involve siblings, cousins and other family members, ultimately leading to a mix of family members, some of whom own shares in the business but are completely uninvolved in the running of the company, and others who work in the business and may or may not have shares. This rich tapestry that can evolve over generations represents a diverse set of views and stakes in the success of the business; depending on how it is harnessed, this can be the making or breaking of the business.
Family first or business first
The approach taken by a family business often tends to evolve dynamically with the introduction of new family members and new business challenges, so as a starting point here are two illustrations that demonstrate the complexity.
The “family first“ approach to business rests on the belief that decisions related to strategy, management and finance are influenced by family composition, interests and skills, and that family members should occupy the leadership positions. In these businesses non-family members may be “adopted“, and often come to feel like family, or they remain on the fringes of the enterprise.
The opposite, “business first”, approach tends to lead to no special privileges for family members, and rewards are firmly based on merit. Often fewer family members work in the business, the rest of the family is somewhat disconnected. Add to this mix family and non-family members – some may own stock – and it is clear that there is lots of ground for potential differences and disagreements.
There are probably as many points along the continuum as there are family businesses, and there is no perfect recipe. What is clear, however, is that managing this challenge effectively can help to create strong synergies, where the “Family Strategy“ and the “Company Strategy“ reinforce one another, leading to stronger and more sustainable business. Left to natural forces, however, it can easily get out of hand and lead to potential problems and conflicts which can stifle progress for the business and may ultimately lead to its end.
A focus on Family Strategy is therefore a unique and key element of support needed by family businesses to enable them to sustain and grow, and it needs to be addressed head-on to find the right approach for each business.
ICE Founder Dinah Bennett in association with Yolanda Gibb
Image courtesy of cooldesign / FreeDigitalPhotos.net