For many years, family businesses were handed down through the generations. Its earliest origins are probably in agriculture when we moved from hunter-gatherers to crop producing communities and continuity was vital for the maintenance of early cultivated food supplies. It is only in recent years this general passage from father to son (or sometimes daughter) has been in decline.

For many generations, family businesses were seen as providing continuity, producing safe local brand names that people could trust in. For the families, this allowed a sense of heritage, pride and security of livelihood in an otherwise harsh economic world.

Family businesses, therefore, produced historically, a form of tradition and business continuity. In many modern businesses, that family heritage continues. However, businesses have become larger, more sophisticated and focused upon growth in a way to which continuity focus of previous generations did not always aspire. Increasing global competition and the birth of entrepreneurship has placed the family business in a position where it must be highly competitive, lean, fit and strategically focused. The guarantee of business continuity by an established family name has given way to sophisticated branding and product placement.

An entirely different environment for those that populate family businesses now exists in the modern world. Demands to ensure competitiveness are high and pressures upon family members to perform as part of the business have never been greater. Of course, in many family businesses, the Esprit de corps and shared values result in businesses striving extremely hard indeed. Equally, however, motivation to be part of a family business is often a “given” and that can lead to the toleration of unsuitable or unmotivated family members within an organisation, rendering the organisation less fit for the competitive vicissitudes of business in a modern world.

Many use the term “dysfunctional” when we talk about problem families, such dysfunctions can extend to family businesses. Family dynamics are complex power structures that involve conflicts and close intimate relationships that extend beyond working hours. Families that have a matriarchal or patriarchal power base, for example, can frequently extend these practices into the work place. Staff in such organisations can often feel demotivated as a family member simply receives high office as a result of their place within the family and merit within the organisation becomes a secondary consideration. Family disputes and other dynamics can easily be carried into the organisation and these affect the relational spaces that exist between family members and non-family based staff.

As a coach and consultant, I frequently had to deal with family businesses where family relationships were subject to poor boundary management and as a result, resulted in a less able organisation. Equally I have had to deal with organisations that have brought somebody in from the outside, to give the family business a new renaissance, only for this business “saviour” to be redefined as the problem in the organisation and subsequently jettisoned once they introduced a changed regime that unwittingly cut across family dynamics in its process and therefore disturbed a familial “status quo”. For those trying to effect change in such organisations, one can often change organisational dynamics, but when these are linked and mirror family dynamics, take extreme care.

Of course no perfect system exists and the key note in this is to ensure that people understand some simple rules in a family company if it is to move forward:-

1)    In family companies, dynamics within the family can often mirror the history, culture and current practices of the business.

2)    Family members involved in business require clear role boundaries. These often need to be supported by somebody external to the family, such as a coach or similar.

3)    Continuity of the company is not always continuity of the family line in the company. Relatives may not want to be a part of the process or may feel obliged to do so in which case they should be allowed to follow their own way;

4)    Family members need to be appointed on merit. It is not good for a company to have somebody there just because he or she is your son or daughter, wife or cousin. Appointment on merit is a great leveller and is good both for family members appointed and for non-family members who seek employment.;

5)    Family members should gain experience elsewhere, working on the family business is great but the opportunity for the cross fertilization of experience by working in another organisation is invaluable;

6)    Having a family business is not in itself a succession plan, avoid complacency in this respect;

7)    Obtain external oversight. Fresh eyes on the board, for example, could be important ;

8)    Exercise transparency as a core organisational value. Transparency and openness that owns up to the reality of familial relationships operating in the organisation and how people feel about them is critical feedback for both family members and to maintain credibility with others. Periodically this may require external mediation or arbitration.

Family businesses are here to stay, with just a few simple additions, their strengths could be celebrated and they can contribute to our communities and the economies in highly productive ways creating jobs, wealth and a mixture of continuity and change. Family businesses however that fail to take simple steps to manage familial dynamics in an organisational setting, run the risk of lost competitive edge, staffing disputes, stress and dysfunction.

David Cliff is Managing Director of Gedanken and Chairman of the Institute of Directors’ Northern Sector Group.

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