In the future, I see myself managing my own business. I will do everything in my power to ensure that the business grows and provides my family and my employees with a decent way of living while ensuring excellent customer satisfaction. I may tend to employ people whom I trust especially for key positions and the people whom I trust the most are the members of my family. Starting as a small organization, I will be working intimately with almost all employees across all levels of the organization. This may result to me seeing the rest of the organization as my extended family. But this may then pose a problem for me in the implementation of business and management practices that may be in conflict with my familial relationship with the members of the organization. Would this then hinder me as I strive to ensure the growth and success of my family business and organization?
A study conducted by Astrachan and Kolenko (1994) on family firms in the United States of America looked at the most prevalent Human Resource Management (HRM) and governance practices utilized by family firms and if these have any contribution to family business success and survival. They found out that the most common HRM practices used by successful family firms are: formal employee reviews, set compensation plans, written employee manuals, and use of written job descriptions. They then set to understand if the use of these practices had any impact on the success of family businesses. The study showed the positive association between HRM practices and gross firm revenues. Also, there was a positive association found between governance practices and business survival and firm’s success.
This study illustrates how important it is for family business to implement and institutionalize sound HRM and governance practices to ensure the sustainability and success of their organizations. Not only are these practices present in most of the family firms studied, but also that the application of these practices were associated with success in family firms. The professionalization of systems, structures and processes can thus greatly impact the potential of a family firm to succeed in its industry while the failure to implement these may provide other non-family firms the opportunity to gain competitive advantage. This is not to say that family firms should only focus on these practices. Other factors may contribute to the overall success of a business; however, this reminds us of the importance of professionalizing how we manage the people component in our organizations.
Written by: TJ Medrana