• Simple Complexities of Family Businesses

    We have been servicing family businesses for quite a while and they usually ask for two (2) things at the very start: professionalization and family governance. When prospective family business clients talk in further detail about what it means to “professionalize”, they begin talking about how the processes are not documented, the policies are unclear, and how there is no formal structure for anything. Meetings are done at the dinner table. Planning is a function done everywhere and anywhere. All statements are taken as directives, even if at the time of stating, it was a thought or an opinion.

    On the other hand, family governance is understood to be the solution to prevent family issues from wreaking havoc in the business. By family issues, typically, we mean self-interests, personality clashes, sibling rivalries, and all the ugly things that family businesses go through in our beloved telenovelas at Prime Time Bida. We usually find out though, that the processes are well documented. There is some semblance of clarity in terms of policies. There are booked appointment dates and times for meetings and planning sessions. And sadly for prime time bida fans, the family issues are much more complex than the individuals that play the contrabida. Not surprisingly, very few family members want to destroy their empire. Most, if not all, family members desire to have their businesses grow and flourish.

    Interestingly, the perceived lack of professionalism in a family-run business is usually the effect of the organization’s perception of the family, and a lack of clarity in terms of expectations from family members. Family members are perceived as exempted from all processes, policies, and procedures because they are, ultimately the owners (even if technically, the owners are actually the parents). As a result, the family members, even with the purest intentions, are seen as “wreaking havoc”, and yet, no one seems to have the power to call it out.

    Family-run businesses are more complex because there are more things at stake. More than just the business, the very thing that we all hold dear, our familial relationships, are put at stake in a family-run business. Furthermore, while everyone in the family wants what they perceive is best for the business, without a formal venue to talk about where they want to tackle the issue of sustainability and direction, there is very little sharing and commitment to what is best for the business.

    Family governance, used correctly, may help in drawing the line between the household from the business, the individual person from the manager, the parent from the boss, the family and the stockholders. That line may be a simple agreement of where the organization must be taken to, and formalizing how each family member – at the board level, top management, middle management, and staff – can contribute to realizing the goal.

    Written by: Sari Daradar

    Posted on: September 9th, 2014 by READS Web Admin