A New Look at the Business First/Family First Challenge

A New Look at the
Business First/Family First Challenge

For years, family-owned businesses have been told about the importance of managing the family’s relationship to its business. It is one of the most significant challenges facing the family business, and meeting the challenge can be difficult. There is a new way to look at this issue that can improve the way you and your family manage the family/business relationship.

Every family business is vitally interested in attaining three things:

  1. Business prosperity 
  2. Family harmony 
  3. Personal well being.

Business prosperity is important because our individual and collective financial security depends on it. Family harmony is important because we are bound together for life in our families, and want to enjoy the family relationship. Personal well being is important because we each have our own goals for our lives and are driven to reach them.

Achieving all three of the goals is the ideal. It is what family businesses work hard to accomplish. The unfortunate reality is that instead of prosperity, harmony and well being, far too many family businesses experience under-performing businesses, family conflict and ambiguity about the future.

The gap between the ideal and the reality is the result of two dynamics:

  1. The traditional way in which we have approached the conflict between family values and business values; and  
  2. A failure to recognize and respect differences in individual definitions of personal well being.We’ll look at the first issue now, and explore the second in a future edition.

Family Values/Business Values

The values which drive successful businesses are quite different than the values we apply in our families.

Family Values 

  • Emotionally based
  • Relationship driven
  • Lifetime membership
  • Support
  • Security
  • Equality
  • Inwardly directed
  • Closed system
  • Avoid confrontations
  • Resist change

Business Values

  • Fact based
  • Results driven
  • Earned membership
  • Competition
  • Risk
  • Equitability
  • Outward looking
  • Open system
  • Face confrontations
  • Master change

Look at the list. Not only are the values different, but–item for item–they are the exact opposites of one another.

Part of life in a family business is that we are continually faced with decisions that involve both family and business considerations. For years, traditional thinking about making those decisions has suggested that either/or choices must be made.

Family members have been told that they must decide to either make a business first choice or a family first choice. Our experience has given us a new and more productive perspective on family/business decision making.

Replacing “Either/Or” Thinking

Either/or decisions really don’t work very well when both business prosperity and family harmony are at stake. Families can be virtually incapacitated if they feel they must choose between the family or the business.

The new and more productive perspective is to replace either/or thinking with a balanced and/both approach to family/business decision making. The difference between to two decision approaches is best shown by two examples.

Rules for Employment Family Members

One question all family businesses face is about the hiring of family members. The future will be much smoother if your have explicit rules to guide your hiring decisions. Traditional either/or thinking might lead to the following rules:

  • Family First Hiring Rule:Hire any relative who needs a job, whether or not they are qualified and whether or not there is a job opening.  
  • Business First Hiring Rule: Select the best candidate available–either family or non family, and only when there is an opening.

Adopting the family first approach gets all the children a job, but can wreak havoc in a business. Taking the business first approach can close the door to family members who can contribute to the business. If you look hard enough, you can almost always find a more qualified non-family member.

Balanced “And/Both” Hiring Rule: When there is an opening, we will give preference to qualified and interested family members with experience outside the business.

There are many benefits associated with the balanced approach. Family members know they must be qualified–and that they must have demonstrated their competence in another work setting. At the same time, they also know the door is open. You could find a more fully qualified non family candidate who could hit the ground running, but you want to keep continuity of family management if possible. Therefore, you are willing to invest more in developing family members once they are in the business.

Performance Management Rules

Another often sticky issue is what to do about giving family members feedback on their job performance.

Family First Approach: Avoid performance reviews and penalties for sub-standard performance.

Business First Approach: Mandate that supervisors provide performance reviews to family members and take appropriate action to respond to performance problems.

Neither of these works too well in practice. Family members don’t like reviewing a relative’s performance because their personal relationship may be damaged. Non family supervisors also dislike the task. There may be some personal risk in being honest about how the bosses son or daughter is really performing. And, if they highlight a performance problem but no action is taken, they will be made to look powerless.

Balanced “And/Both” Approach: Have both a family member executive and a non-family supervisor or manager conduct the review together. With this approach the family’s commitment to performance and to honesty and openness in communication is reinforced. Moreover, commitments to correct performance deficiencies will be open knowledge shared by the incumbent, his or her non family supervisor and a family executive.

The Physical Law of Balance

BALANCE is the secret to successfully managing the family/business relationship. Imagine your family business as a balance beam resting on the point of a triangle–with the family at one end of the beam and the business at the other. Your responsibility is to keep that beam in balance.

There is no way to keep the beam in balance if you move the triangle all the way to the family end (either/or family first decisions), or all the way to the business end (either/or business first decisions). Balance can only be maintained by carefully moving the triangle toward (but not all the way to) either end. If the family component of a family/business decision is the weightier consideration, then adjust toward the family end of the beam. If the business component is heavier, adjust toward the business end.

It is a balancing act that will be performed again and again in any family business. Furthermore, it is a balancing act in which all adult family members are the performers. Practice makes perfect. Consider reviewing your family/business rules at your next family retreat. Make sure they reflect a balanced and/both perspective to managing the family/business relationship.