The Family that Earns Together

Tips on Running that Family Business

January 14, 2005

Running a family business may seem uncomplicated to an outsider, but this is in reality one enterprise that's fraught with difficulties.  The fact that the players in a family business are related by blood and have shared personal interactions for the longest time can make decision-making an emotionally challenging task at times.

Let's take the case of Danny, the eldest son of Geronimo Cruz who owns a food processing business.  Danny, who never finished college, had been involved in this family business for more than a decade already when his younger brother Jess graduated from college with a business administration degree.  Geronimo immediately started grooming Jess to be his right hand man without even informing Danny, who resented the fact that his much younger brother suddenly became his boss.  Family trouble, as expected, followed.

This problem would not occur, or would be easier to handle if it did, in a public company.  What complicates things in this example is the fact that Danny has never taken an order from Jess before, and is in fact used to ordering his smaller brother around.  Jess becoming his boss is a reversal of roles that is too huge for his pride to handle. 

Another example involves Mr. Chua, who owns a chain of auto repair shops.  He has two assistants in running the business - his son, Edgar, and his nephew, Carlo.  Edgar and Carlo are of the same age, and more or less of equal skill and experience.  However, Carlo is more subservient than Edgar, a characteristic that Mr. Chua valued.  Carlo eventually got ahead of Edgar in the company ladder.  Again, our example has a sad ending, with Edgar severing his ties with his father after failing to understand how his own father could bypass him in favor of his cousin.

These are but two examples of how conflicts in a family business can arise.  In the first example, a business decision that ran in contrast with the sibling hierarchy resulted in the problem. In the second example, the business decision clashed with a son's expectation that his father will take his side anywhere, anytime. Other forms of family business conflict include: 1) the youngest child feeling exploited at the bottom rung of the company ladder; 2) deeply-rooted sibling rivalry; 3) perceived favoritism of one or both parents; and 4)

According to experts, the source of many family business conflicts is failure to draw a line between family relationships and business interest.  Many people just feel that a family business should be run the way their family affairs are run. The fact is, one can never rearrange a family tree, but can certainly rearrange an organizational chart as often as needed.  To treat an organizational chart like a family tree is like giving the company its death sentence.

To prevent family businesses from failing due to internal conflicts, experts give the following tips: 1) have a long-term vision for the company and ask commitment from all family members to support it, whatever it takes; 2) make the business progressive and forward-looking, so that everybody can have a chance to extend the products or services being offered by the company; 3) set up a system for orderly succession; 4) train everybody to be professional enough to separate family or personal concerns from business matters.

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