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Understanding the Ownership & Management of Family Business

Ownership & Management of Family Business

Family is (hopefully) for life. If the family business starts to interfere negatively with the relationships in the family, then there is imbalance. Family businesses are challenging because of the overlapping of family, business and ownership (known as the “three circle model”). Researchers from Harvard have extended this into four “rooms” by adding in the board room.

Because family members wear multiple hats, are in multiple circles, or sit in multiple rooms, they need an awareness of how those roles influence the decisions they need to make. Father or boss? Director or cousin? Manager or owner?

It’s most important to be able to have open and trusting conversations about needs of the business and expectations of the family. Those are underpinned by the core values and the common values across both personal and professional life. Each successive generation should ask why they are in the business. Successful family businesses foster a sense of stewardship among all members of the family (no matter what their specific roles).

Making multiple roles work requires setting boundaries between work time and family space. Conflict will happen, so rather than “fake harmony” (see previous article), the ability to communicate, deal with issues, and have “constructive conflict” is essential.

Some kind of a conscious separation of ownership and management is very helpful. Avoid having “too many chefs in the kitchen”. Family members who work in the business should be recruited and evaluated with the same criteria as anyone else. And “don’t hire whom you can’t fire”.

Consider This: Do family members involved in your family business understand the different hats they wear? Have you ever had to performance manage a family member employee? Do you have the governance structures to deal with conflict?

Original articles: 

Here is more on reading on family business governance.

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