It’s been 20 years since I worked with senior executives around the globe. It’s fascinating to see what mistakes are made when appointing them. While there are many reasons for this, one of the most common is not being able to understand the differences between working in a Family Business or a Non-Family Business. Recently, I met many Senior Executives who were unhappy in their jobs due to this lack of understanding. I also meet Business owners who don’t realize there is a difference. These business owners believe that money and titles are enough. They also adhere to the mantra of “Surely, experienced ‘C’-level Executives can work for any company.”
Because of the economic changes, I am more involved in helping Family Businesses than the corporations to find ‘C-level’ people. This is why I think everyone involved in the hiring of Senior Executives should understand the differences between the two entities. This has been a life-changing experience for me as I have seen the struggles and triumphs of both Indian and English Family Businesses. This has given me the ability to help others run their businesses and also helped me with my theoretical knowledge.
A successful New Zealand Entrepreneur founded a company that I was involved in. He doesn’t have anyone in his immediate family who he can hand over the reins to. He tried to find executives outside his immediate family to fill his C-level roles, and has had three different people over the past three years. What’s the problem? This was a family business? Did the problem lie with the executive or his?
While we discussed the causes of the failures, I encouraged the owner to look at the origins of his employees before he could assist him. They were all ‘C’-level corporate employees and did an outstanding job in their corporate environments. All three of them returned to corporate life, and they did well in their new roles. What made them fail in their new roles at this successful company?
The owner needed to identify a Family Business. Although I don’t usually use dictionary definitions, Wikipedia provides a good explanation of Family Business in this case.
A commercial organization where decision-making is influenced and influenced by multiple generations of family members, related by blood or marriage, who are closely associated with the company through leadership or ownership. Wikipedia 2014: Owner-manager entrepreneurial businesses are not family businesses. They lack the multigenerational dimension of family influence and the family connection that make family businesses unique.
We both looked at his company. He didn’t have any immediate family members to take over the reins, but he did have people who were minor leaders in the company. Both of us agreed that he had a Family Business.
He believed that he could increase his business’ growth by hiring top-salaried ‘C’-level executives from corporations. He didn’t see any differences between Family Business and Non-Family Business.
Urban Myths for Family Businesses
All businesses are instabile Small to Medium size’.
An Executive doesn’t want me to be the one who babysits my junior family members in order for them to take over my job.
The company will not be run by a non-family member.
Mother and Father Companies are the only ones that matter to the company. Family members are the most important.
Emotional hard to work places due to family disagreements/arguments.
Family members with incompetent skills are often placed in authority positions.
These statements are true or urban myths?
Family businesses are one the fastest-growing sectors of the global economy. Senior executives should seriously consider them when looking to further their careers. This is a remarkable turnaround from 25 years ago, when no one wanted to work in a family-owned company. There are many positives now.
InterSearch’s Patricia Epperlein reports that
90% of American businesses are family-owned. They account for 40% of the nation’s GNP, and they pay about half of its total wages.
Family-owned companies make up 59% of France’s Top 500 industrial companies.
According to estimates, 70%-85% of all businesses in the world are family-owned.
Tom O’Neil NZ Herald. Jan 2014 states
The lifeblood of New Zealand’s industry are small- and medium-sized businesses. Many sources mention family businesses representing 75% of Kiwi firms. They provide up to 80% of the country’s employment and 66% of its national GDP.
It is interesting to observe that companies all over the globe claim to be a family business. They are trying to promote positive family values such as honesty, loyalty, trust, and integrity.
All Family Businesses are not SMEs. These companies include:
Porsche
WalMart
Tata Group.
New Zealand’s Talley Family (Agribusiness), and Pandey Family (Hotels) are represented.
Simon Peacocke, a BDO Auckland Family Business Advisor, works with many NZ Family Businesses. He believes that these businesses do well due to the following reasons:
Family businesses are more resilient than other businesses and have a longer-term view.
At a young age, second and third-generation family business owners begin their apprenticeship. They hear their parents talk about the business at five years old, so they have a lot of knowledge.
They also tend to have different relationships with their staff and communities – closer, stronger, and more loyal.
Employees tend to be part of the family and stay with the company as committed, long-term employees.
Corporates love to be seen supporting their communities. Family businesses, however, don’t often promote that they do this.
They aren’t trying to make quick money by spending a lot of money.
They are also very focused on building relationships with customers, staff, and suppliers.
Is it worth working in a family business? What is better, working for a non-family business? Does it make a difference if the economy is doing well or in trouble?
According to the Harvard Business Review, Nicolas Kachaner 2012
“Results show family-owned businesses don’t make as much during economic booms as those with more diverse ownership structures. However, family businesses far outperform their peers when the economy is in decline. We found that family businesses had a higher average long-term financial performance than non-family businesses when we examined business cycles between 1997 and 2009.
Senior executives looking to be long-lasting in their work should consider the Family Business. This would allow them to navigate through different economies with varying levels of prosperity. This will be achieved in a cost-effective manner.
Business consultants believe they can easily tell if a company is a Family Business or Non-Family Business. It is easy to walk into the Head Office. Non-family offices have a large corporate office with a high “Wow Factor”. Frugal family businesses have fewer “Bells and Whistles” than those that are more frugal. This Frugality refers to the Family Business CEO who is looking to invest in the long-term 20 year plan and the business being passed down through the generations. The non-Family CEO wants to be a success and surpass the person who took over. Many studies have shown that Family Businesses performed better during the global recession. Family Businesses are able to weather economic storms by being frugal, both in good and bad times.
My client had three ‘C-Level’ people over three years. This was one of the reasons my client lost. His ‘C-level people came up with a quick turnaround plan that they thought would fix the problem quickly and outspend the last person so they could do something immediately. They didn’t have a twenty-year plan because they hadn’t had this type of work in the past.
Are Family Businesses different in other countries?
Justin Craig, PhD states
“Interestingly, family businesses as a sector don’t vary that much from one country to the next. While there are cultural differences, a family business is difficult in every country. Let’s not forget, it is also more rewarding that working in a corporate setting. There are older companies in Europe than there is in Australia, New Zealand, or the United States. The mindsets of companies in Europe may be different than those in developed countries. The differences in day-to-day life aren’t noticeable. While older businesses may have more to lose and more at stake, they also have the potential for greater benefits. Three systems are still independent and interdependent and must be managed by family leaders: the family, the business, and the ownership group.
It is important to hire the right Senior Executives for any company. This is a significant investment. While there are many reasons for hiring at this level to fail, it can make a big difference in your company’s success.
Answering one of my questions is: Can a C-Level person work in any type or family business, non-family, or family?
They can, but only if they have a good understanding of the differences between the two. They must be certain of the type of business they will be working in. Sometimes this can be difficult to determine. Take a look at the great corporate companies like Tata, Walmart and Porsche.
