The Tribune

By Ian Ferguson

A well-respected business owner recently questioned me on the benefits and drawbacks of owning and operating a business that employs family members, and where the principals in the company are all related. Our country has seen a number of successful family-operated businesses that have made significant contributions to the business community and economy. A number of foreign-owned businesses, too, have developed great family business models where even young children serve the business as cashiers and stock keepers.

Our conversation today gives the pros and cons of family businesses, but also provides suggestions for strengthening companies that employ relatives.

Pro 1: Family-owned businesses enjoy the benefit of a loyal employee base. Family members will often exhibit more dedication to the common goals, and there are usually less team issues.

Having a certain level of intimacy within the operation can help bring about familiarity with the company, and having family members around provides a built-in support system that should ensure solidarity. Other benefits of a family business include long-term stability, trust, loyalty and shared values. Families also tend to be more willing to make sacrifices for the sake of the business.

Pro 2: Families tend to be more lenient and forgiving when it comes to work schedules, work-related decisions and even mistakes. In a family business, there may be more leeway to work a flexible or part-time schedule, or to choose your own hours, so you can attend to your children, parents or other family members in need.

Pro 3: Family-owned businesses tend to have easier and faster communication when work-related situations arise outside of business hours. Impromptu Board meetings at the living room table remove the barrier of bureaucracy and red tape associated with standard business environments.

Pro 4: In family businesses, you usually have prior knowledge of your co-workers’ strengths, weaknesses and temperament. Because you have lived with and know these people intimately, you have the heads up regarding what to expect in varying situations.

Con 1: Nepotism is always a great challenge in family-owned businesses. Business owners may sometimes automatically promote family members or give them a job even if they do not have adequate skills for the position.

Just because the person is a family member does not mean he will be best suited to a given job, and a company that hires only relatives may end up having some bad apples. Sometimes, skill and work experience may be neglected. Business owners also cannot expect all family members to love the business.

Con 2: Family businesses bring up a lot of conflict and challenges. They can be a source of difficulty when it comes to issues on succession, sibling relationships and marital conflict.

Succession is one of the most difficult challenges that family businesses face, and can become a challenge when the older generation does not give the younger generation the needed room to learn, develop and grow.

Sometimes, no one in a subsequent generation even wants to assume the leadership position in his parent’s business. Oftentimes, relationships between parents and children, or among siblings, tend to deteriorate due to lack of communication within the family. A dysfunctional home environment taken into a work situation often becomes a failed business venture.

Con 3: There is often great awkwardness over basic communications that must occur in a business setting. Reprimanding employees, assessing their performance, terminating employment or asking for a raise could be quite sensitive when dealing with relatives. There may arise severe pangs of guilt that your actions, mistakes or desire to change careers or communicate difficult messages will hurt the family.

Con 4: Family businesses often come with added pressure to live up to parental expectations and stifled professional growth because of too much hand-holding and familiarity. The desire to socialise with the family you work with decreases, since you already spend so much time with them.

Whether you have experienced more of the pros or cons of running a family-operated business, it is important to do what you must to make it work. As with most things in life, respect is key. If you find the business environment is adversely impacting your home life, tough decisions to explore other business avenues should be explored. The family circle must not suffer in an attempt to exploit the skills and talents of relatives.

Other tips for maintaining strong relationships, both inside the office and out, include ensuring everyone has a clear role, encouraging outside consultancy for fresh perspective, and abiding by corporate codes and standards for all employees avoiding nepotistic language and behaviour.

NB: Ian R. Ferguson was educated locally, regionally and internationally, having earned a Master’s Degree in Education from the University of Miami. During the course of his nearly 20 years in education, talent management and human resources, he has served both the public and private sector in senior management roles. He currently serves as manager of the Chamber Institute, and as a local consultant in the field, having assisted hundreds of local and regional businesses in improving business and service excellence through their human capital.