Although this saying does not apply to all family businesses there is a lot of truth to it. Many families struggle to overcome these tendencies. Many businesses get in trouble over family issues. At the same time, both family and business can benefit from working and growing together.

Understanding different perspectives of your family business can help you avoid the potholes on the way, and contribute to making the best out of the opportunities ahead.

Three perspectives
Of course there are a lot of different ways to look at family businesses. Three perspectives are key to meeting the challenges of a family enterprise: business, ownership, and family. Family businesses differ in how they are organized around these three perspectives. Although they overlap, they should be viewed as separate subsystems.

Persons involved in your family business, whether family or employees, can be looked at from the ownership, the business, or the family perspective. The diagram shows where different people are in relation to each perspective.

Everybody who is family is in circle 1.
Everybody who works in or for the business is in circle 2.
Everybody who is a shareholder is in circle 3.

If everyone in your family business would only be part of one circle and be nothing else to the enterprise, then the three circles would not overlap. But then we would not be talking about a family business. That’s what is special about family businesses: people involved are part of different circles.

Some of your employees might only be part of the business cycle (sector 2). Some of your family members might only be part of the family cycle (sector 1). It helps to guide you and them in making the right decisions if you spend some time clarifying what their involvement and contributions are to the family and business.

Facing a decision about which family members should work in the enterprise and which would do better somewhere else can be a very difficult situation for the business family. Employee owners (sector 6) can be rather resentful about family members being drawn into the business with what they perceive as minor qualifications. They like to see the best person hired for a job. They are afraid of someone coming in with special privileges but without special skills.

On the other hand, for many families it is part of their culture and philosophy as a business family to have as many family members as possible working together in the same enterprise. One of the benefits of all the hard work on the family farm is the chance to work together as a team with the people you trust and love. Sons and daughters growing up on the farm are not just another employee. Ideally, they have been part of the business and contributed since an early age. They know the farm from youth, and have learned the trade very thoroughly in a way that can hardly be achieved by someone from the outside.

Certainly, the ideal is not always realized, and sometimes the employees’ fears of another family member stirring things up are well founded. Therefore, if you want your children to grow up to become employees, managers, and, at some point, owners of your farm, you will have to prepare for this early on. Start letting them share what’s going on at an early age. Let them participate in the farming decisions at the level they are at. If you keep the right to make final decisions until the very end, they won’t grow up to be the managers and owners you want them to be. Family farm succession is a long-term project. When parents plan to hand over control to their children, they might begin to share limited control with them while they are still young. This is a difficult step to take.

For the sake of the family, the employees and the business aspire to define everybody’s role on the family farm or in the family business. As long as a family member is an employee, the ‘chain of command’ has to apply to him or her, the same as to other employees. The wages have to be fair, depending on work done, with no extra dollars for family membership. If someone in the family needs more money, look for other ways to do this: a loan, dividends based on ownership, or a different higher paying job. However, it can hurt your business to base promotion on family membership. You might lose your best employees if they feel they will not be promoted or they are doing the less interesting jobs because there is always some family member outranking them.

High benefits, high challenges, hard work, and great fun are the different aspects of a family business. Meeting the challenges and having fun together after hard work is very rewarding. People and businesses change over time, and new challenges are just around the corner. But different generations working and growing together is a way of life.

Clarifying interests
Sometimes family business issues get mixed up, and on-going misunderstandings lead to deep wounds that prohibit the family and the business from prospering. In these cases, an outside mediator can support the family. If the main issues are related to the business, a consultant might be the best choice. Where the problem exactly lies is hardly visible to those involved when the tensions are high. Your Extension agent can help you sort out the issues and decide how to proceed. The use of some management tools can prevent unnecessary tension by spelling out the position that everybody is in. Job descriptions, for example, are helpful in pointing out everybody’s role in relation to the business.

Each person involved can live up to their potential and develop his or her role in the business, in the family, or as an owner more easily once the situation is clarified. Interests coming from the different perspectives will be obvious to anyone involved. Developing joint decisions will become less painful. Solutions can be found more easily. Possible conflicts may even be avoided. Clarifying where everybody stands will contribute to smoother relationships and better business decisions.

Reading tip: Gersick, K.E.; David, J. A.; Hampton, M. M.; Lansberg, I. (1997): Generation to generation: Life cycles of the family business. Harvard Business School Press, Boston, Massachusetts. ISBN 0-87584-555-X.