Thought Leadership

By Jim Ward

May 10, 2019

“The lousy thing about family ownership is, well, family”

Bill Plasachke, LA Times

Recently, a good friend of mine reached out to me for some professional advice. He was considering going to work for a family owned business and was not sure it was the right move for him. He was looking for a third party opinion on the possible merits, or disadvantages, of working for a family-owned business.

Working for a family-owned business can lead to a rewarding and promising career; however, one should be mindful of the possible pitfalls. As I discussed this with my friend, a number of issues arose, some of which include the following:

  • First and foremost, when you join a family-owned business, and you are not family, you will never be part of the “family.” This is critical to understanding where you stand in the pecking order. You may have a very close and trusting relationship with the family, but in the end, blood is thicker than water. Having a clear understanding of the family politics and what it means to not be family is important to one’s success.

  • A family member will always be the top decision maker. I once did some consulting work for the Chief Operating Officer (COO) of a very large family office with a $5 billion investment portfolio. I soon discovered that while this COO had an important position and title as the number 2 person in the organization, he had limited authority. “Real” authority will always lie with the family.

  • The unwritten rules for family members can be different. Family-owned and managed businesses will tend to hire other family members to work there, regardless of experience or qualifications. Nepotism can be an issue.

  • Performance norms can be different for family vs. non-family. Standards of performance competencies can be blurred when comparing family members with non-family. Often, substandard performance is accepted with family members, with little or no recourse. Family members will often make performance decisions based on emotions, rather than rational facts. This can lead to situations where a person’s strengths are overstated, and their weaknesses minimized or overlooked altogether. You cannot just fire the owner’s son or daughter, just because you consider him or her a “slacker.”

  • In terms of talent and rewards, a family-owned business may lack process and structure. For example, in terms of upward mobility the process can be less than transparent. Also, compensation plans are often not spelled out and apply differently depending on family vs. non-family. Policies may not be as clearly defined and transparent to all staff. These areas of attention are important to be mindful of because the atmosphere is often less structured within a family-owned business and a common pitfall is to accept a verbal agreement for employment terms.

On the positive front, there can be many advantages to working for a family owned b...

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