The decision to join a family business can be difficult because once you’re in, you’re in for the long haul. You can leave IBM with two-weeks notice. But mixing blood and money means you are committing big time to Johnson’s Distributors or Jones and Sons Auto Repair.
Is the family business right for you?
Family Ties
Harvard Business School’s John Davis, who runs the family business program, tells the Wall Street Journal that you should wait until you are in your late 20s or early 30s to make a decision. Know something about yourself before you attach yourself at the hip with the family enterprise.
If you already run a family business, you already know how complex the relationships can become. The key to success is organizing the business just as you would any other, with charters, governance procedures, and the like. Spell it all out. Over the years Davis has contributed a number of articles for HBS Working Knowledge that provides useful advice on how this can be accomplished.
- Governing the Family Business. Every business needs effective governance procedures, but the family business has its own unique set of issues to deal with. Example: “Family shareholders not employed in the business often have different views about the proper level of dividends than do their relative owners who work in the business,” Davis notes.
- Organizing the Family Business. Who sets the direction and policies for the business? The family? Shareholders? Nope, just as in the traditional business organization, the Board is responsible for steering the ship.
- The Three Components of Family Governance. Family governance has three components: a the family constitution, annual meetings, and family council meetings. “I prefer the simplest structure that does the job and the three components above are all most families in business need,” Davis writes.
- Five Steps to Better Family Negotiations. Managers running a family business are faced with additional complexity in negotiations because of personal relationships and family history. Better think thrice about how to resolve them.
Are you in a family business? What are the pluses and minuses from your perspective?
