When you think of the term "family business," you may initially think of the mom and pop store in your neighborhood—you know, the kind of small business that supports and is run by a single family. You rarely think of large, successful, global organisations.
The fact of the matter is that "family businesses" come in all shapes and sizes, from the small convenience store where father orders the merchandise, mother does the books, and the kids run the cash register, to the large corporation that provides income not only to the family members who own or control it, but to thousands of other families as well. Some of these businesses are governed by family members only, while others rely heavily on outside influences. Some family businesses employ a "hands-on" philosophy, while in others family members merely play an advisory role.
My point here is that there is no one "blueprint" that these businesses must follow. That being said, when I refer to "family businesses" in my book, you can assume four things to be true:
- More than one family member owns or works in the business
- The business provides income for more than one family member
- Family members retain control of the business, either by playing prominent roles, or by maintaining voting control
- There is intent to keep the business within the family
Distinctions Between Family and Non-Family Businesses
How are family businesses distinct?
One of the biggest differences between family and non-family businesses is that those involved in family businesses have what I like to call more "skin in the game." Skin in the game is the amount that's at stake for you personally, depending upon your organisation's successes or failures. Regardless of where we work or what we do, we all have some degree of skin in the game.
To illustrate, let's compare CEO "A" and CEO "B."
CEO "A" was recently hired at a large computer company, after working up the ranks at several other companies. He knows that his success is directly tied to the success of the company. If the company makes a profit, his compensation is structured so that he benefits in bonuses and incentives. If the company tanks, he could be out of a job. This is certainly incentive enough to do a good job, but when all is said and done CEO "A" is significantly more invested in himself than he is in the company. Chances are he has worked at many companies before this one, and as he climbs the corporate ladder, intends to work at many more. When it comes to growth, he thinks short term. If the company doesn't do well, he simply moves on. His personal net worth is tied up in his success, not just at this organization, but at every place he works throughout this entire career. CEO
"A" is not a family member in a family-run business.
CEO "B" was recently promoted to CEO, after working up the ranks at this one organization. She also knows that her success is directly tied to the success of the company. However, while personal success is important, she is more concerned with the success of the company. As a matter of fact, CEO "B" would go to great lengths, including taking a pay cut or contributing to financing—in order to ensure healthy and sustained growth. Her relationships with her co-workers and colleagues are deeply personal, and she is invested in their success as well as her own. Her commitment to the company is lifelong, and she would never dream of abandoning ship during challenging times. When it comes to growth, she thinks long-term, years and decades, rather than short term. Just like CEO "A," her personal net worth is tied to the success of the company, but even more inextricably linked are her feelings of accomplishment, self-worth, pride, and accountability. To CEO "B" the organisation she works for means so much more than a paycheck. CEO "B" is a family member in a family-run business.
- Be clear on the involvement you will have IN your business - involvement
should not mean micro-management, let your employees be empowered and
so they don't live in fear
- Successful family businesses focus on professionalising the business - think
how can you shift from being IN the business to being ON the business
- Remember an employee will never feel or think like you about your business,
unless they have some "skin in the game."
This is an extract from Reg Athwals book: Unleash Your Family Business DNA.
More from Vistage: