Family-Owned Business: Should You Take Up A Job In One?

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What do you need to know when working in your family’s business?

Family-owned businesses have been in existence for many years. As more people choose to go into entrepreneurship, they are becoming common and you might just find yourself working in your family’s business. However, these businesses have been plagued by infighting and unresolved differences that result in major conflicts and in some cases, dissolution or buyouts.

However, there are some family-owned businesses that have stood the test of time through proper management practices and gone ahead to become some of the world’s largest corporations, such as the Tata group. Many people avoid working in them because of the fights that emerge but, with the right structures and systems in place, they can be rewarding and you can be at the heart of the change that eventually leads your family’s business to becoming one of the world’s largest.

Models of family owned businesses

The first step in successfully running and being involved in a family-owned business is to understand the types of ownership as this is what sets the rules. The models of ownership also determine how transitions are handled and what role each family member plays.

The distributed model

This is the most common one around. It is what most people find themselves in. In this model, ownership is passed down the bloodline from one generation to the next. The owners have equal shares and they get equal compensation regardless of whether they are actively involved in the running of the business or not.

This model is popular because all assets are usually tied to the business as parents often want their children to equally own the assets as well as the business. As such, this model continues to flourish and various influential positions are held by different family members.

The owner model

Perhaps the simplest model, it involves the control of the business being in the hands of one person. The beauty of this model is that it has few conflicts, as much as the controller is answerable to the rest of the family.

The challenge comes when picking the person to run the business after the initial owner hands it over to their children. It is important to pick a person who can balance the needs of the family and those of the business. However, this model is quite rare and it usually evolves into the distributed model once the founder hands over the control of the business to his/her children.

The nested model

This model revolves around a center that is; a business or assets that are jointly owned by a group of businesses, which are run independently. For example, a group of siblings can inherit a business from their parents. They then retain the business as a joint venture but establish their own individual businesses with the help of the core business. In this case, the individual businesses are not jointly owned but the core business, which is jointly owned, supports the individual ventures.

Despite the fact that conflicts occur, this is an effective model in instances conflicts arise regularly and there is a lot of interference when it comes to decision-making. The only risk in this model is that the core business runs the risk of being neglected and underfunded, in preference for the individual business.

The partnership model

In this model, the owners have equal shares in the business and they earn equal salaries from the business. The partners devote equal time and resources to the business and decisions are made by way of consensus.

Although this model is similar to the distributed model, the difference comes in where in the partnership model, owners are actively engaged in the business while in the distributed model, owners, although equal, do not have to be actively involved in the business. This model requires a consensus by all the owners and any disagreement can cripple the business.

The public model

In this model, some shares are usually publicly traded or the company is fully privately owned but run like a publicly traded company.

The main focus is that the owners are not actively involved in the day-to-day running of the business as they have a professional management team and they only hold board positions.

This model is applied where conflicts arise on a regular basis, pertaining to how the company is to be run, ownership is widely distributed, or owners have no interest in the active management of the business. Families that seem to constantly disagree on how the business is to be run are encouraged to adopt his method as it brings on board a professional team that is accountable to a selected board which represents the interests of the family in the business.

Pros of working in a family-owned business

So, you probably come from a family that owns huge business ventures and you think that you have something useful to bring on board but you are not sure whether you want to be part of the business. Well, there are some advantages of working in a family business as discussed.

An effective structure

Most family businesses grow from the owner model and rise progressively until they become big corporations. In such organizations, the family members grow through the ranks by way of hands on training and they thus gain skills in all aspects of the company.

This is one of the reasons why criminal organizations are effective. They have simple structures and the family members are mentored and trained on the different aspects of the business as they grow.

If you work in your family’s business, you are likely to be nurtured from a tender age and you grow with the business. The structure is simple and family members often occupy managerial positions.

More dedication and commitment to the business

Most people in family businesses work hard to protect their reputation. On the other hand, they often have nothing else to turn to as the business is their only source of income, unlike employees who can move from one company to the next.

This commitment will often lead the family members to make ethical and effective decisions so as to sustain the business and protect the family’s legacy, which is often closely tied to the business.

If you work in your family’s business, you are likely to be working with other like-minded family members who are dedicated to the success of the business and will stand by it in good and bad times.

Shared values

If, for example, your family business has grown from the owner model to the distributed model, you and your siblings are likely to have been part of the business and learned the ropes from your parents. As such, your parents have instilled in you shared values that guide how things are done within the organization.

Additionally, family members have a joint sense of pride in the business and they often make decisions based on the company’s best interests.

There is a sense of stability

Unlike other companies that are run by professionals who are free to leave if and when they please, a family business will often have the usual suspects and this means that there is continuity.

Additionally, since the family members know that they are building a company for future generations, they are likely to be very loyal and committed to a clear goal, which then brings about stability.

You do not have to grow through the ranks

In most family businesses, family members rise through the ranks quickly. In most cases, they are simply trained on the basics of the business and they skip to managerial positions. This can be a huge motivating factor for those who are keen on growing their careers very fast. The family members often have shared values and vision for the business and this makes it easy to grow and steer the business in the right direction.

More flexibility

Since you are working with people who know you closely and can easily understand your schedule, you are more likely to get such privileges as days off without much trouble. Close family members are also likely to be more understanding of your personal needs and work around them, meaning that you can easily plan your personal days off without much stress.

The cons

Working in your family’s business can be very fulfilling. You even have the advantage of working with people who have shared values, which makes it easy to make decisions and decide what is best for the business. However, it has its own disadvantages.

Conflict

Many family-owned businesses have been brought down by conflicts and differences in opinion. This is especially in the distributed model where sometimes, some family members may feel like they contribute more to the business due to their active participation and they deserve more recognition than others.

Sibling rivalry can also play out in the decision-making process and this has often crippled some businesses where personal issues were settled through business decisions, especially where a consensus is needed. Conflicts have also been experienced in succession where family members cannot agree on how to distribute the business.

Lack of separation between the personal and professional

In a normal working environment, you will work with people you have not met before and your relationship is solely built around the workplace. However, in a family business, you know each other from a personal point and it can be hard to separate business with personal aspects.

This can often lead to conflicts or people settling personal scores by influencing business decisions and use of resources, which can end up hurting the business. This is especially the case where family members work closely and there is an unhealthy competition.

Incompetency

In some cases, some positions in the business are exclusive to members of the family. These are usually top management positions and a person with little or no qualification might actually get promoted to such a position.

In other cases, a person may not even be interested in the job but still gets it by virtue of being a family member. This leads to lack of innovation and poor decisions are made, affecting the company’s ability to compete effectively in the market. Such inefficiencies have been known to affect family businesses and can cause the business to collapse.

Lack of innovation and new ideas

Most family businesses have evolved from the owner model and have set standards which are passed down from one generation to the next. In such cases, family members who are not visionary may stick to old traditions which are outdated and serve no purpose in the business.

In such cases, the family members may stick to what they have always known as they lack someone with a fresh perspective from outside the business. Additionally, the members may have grown in the business over the years and they lack knowledge in something different. This is why it is always advisable to let family members work for other companies before they take over the running of the business.

There is no break

While in a normal job you get to go home and interact with a different set of people, in a family business you are likely to meet the same people you work with, on a regular basis. It, therefore, means that you are very likely to find yourself discussing business over nyama choma in your next family gathering instead of simply enjoying the bonding.

The fact that business can be discussed anytime means that it is hard to create a healthy work-life balance. This can lead to stress as there is no real relaxation.

In conclusion, working in your family’s business has its own perks. The first step to achieving success is to ensure that you clearly know what model the business falls under so that you know how the systems work. You should then realize that a job in a family business is a job like any other and requires your full attention and dedication to ensure that the business succeeds. There are obvious pros and cons of working in a family business and before you take a job in one, weigh your options carefully so that you can be successful.

Have you worked in your family’s business? What was it like? Join the discussion.

Njeri Karanja
Njeri is a reading and creative writing enthusiast who is neck-deep in research writing. She is well versed in researching and writing on various topics.