The Rulebook for Family Business (Part 2)

In Part 2 of the Rulebook on Family Business, I continue to list the ways you can prevent things from going too wrong. If you have missed the Part 1, read it here.

Since the nature of a family business entails the various relationship dynamics, it is important to keep the following points in mind. 

11. AVOID MAKING PERSONAL ATTACKS

Avoid laying blame or making personal attacks on other family members. Never agree to anything you have reservations about without voicing your concerns and reasons; encourage other family members to do the same.

12. GO FOR MERIT BASED EMPLOYMENT ONLY

All family members should have significant work experience outside the business. Family members should only be employed on merit and in positions that they are qualified to occupy.

13. DO NOT CONFUSE REMUNERATION WITH RETURN ON EQUITY

Remuneration of family members should be no more favourable than that of equivalent non-family employees. Do not confuse remuneration with a return on share ownership.

14. INSTITUTE FAIR APPRAISAL PROCEDURES

Institute appropriate appraisal procedures for all employees, whether family or not. Use outsiders, possibly non-executives, for appraisal of senior family management.

15. DO NOT HESITATE TO OFFER SENIOR MANAGEMENT POSITIONS TO NON-FAMILY MEMBERS

Non-family members should not be excluded from senior positions because of fear of loss of control by the family. If non-family members are more suitable for the job, use them. Do not ignore outsiders – professional management may produce higher returns for the family in the long-term than an ill-qualified family member.

16. A JOB IN THE FAMILY IS NOT A BIRTHRIGHT

If there is no suitable employment for family members, employing them is fraught with risks. A job in the family business should be regarded as an opportunity, not a birth right. Family members should be prepared to work harder than others to prove themselves.

17. DO NOT PRESSURISE FAMILY MEMBERS TO JOIN FAMILY BUSINESS

Do not pressurise family members to join the business – this can cause problems in the long run.

18. FINDING MENTORS FOR FAMILY MEMBERS

Find a mentor for family members both inside and outside of the business.

19. REAL AUTHORITY COMES FROM RESPECT

Remember, real authority comes from the respect you have earned, not from the shares you have inherited.

20. BE OUTWARD LOOKING

Be outward-looking. Consider using the services of a non-executive director (not a family member) to provide a more objective view in the planning and decision-making process.


On a final note, I wanted to add— the challenge for business families is that family, ownership, and business roles involve different and sometimes conflicting values, goals, and actions. It becomes necessary to draw clear boundaries. However, everything said and done, one should also remember to place a high priority on emotional capital— the family success that unites them through consecutive generations!

Let me know what you think in the comments below.

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