What, exactly, is a “family business”? Definitions range from being so vague that they’re practically meaningless (e.g. “any business that considers itself a family business”), to criteria that’s so detailed, it specifies the number of generations and percentage of control that one family, defined granularly, exerts on a business organization. We believe that a family business is a business that is either majority-owned or controlled by one family, related by blood or marriage, irrespective of the last names of the family members. Family businesses come in all shapes and sizes, and they are here to stay globally, gaining power and influence daily.
Family businesses are frequently thought to be primarily mom-and-pop, small businesses. But most people fail to realize that large corporations such as Walmart, Fidelity, Tata, Cargill, Koch Industries, and Ford, to name a few, are all family businesses.
The phrase “family business” is made up of two very different words: “family,” which calls to mind warm, fuzzy feelings around love, joy, and support, and “business,” which is measured in money, profits, impact, and assets. We put the two words together, and often, use business measurements to put rules in place for the family. This is a recipe for failure. Splits and disputes occur often, even in families with well-laid-out constitutions and rules, not to mention a lot of money.
Part of the disconnect lies in the fact that family businesses generally start off with an entrepreneur who turns a dream into a business. At the inception of the business, the family often comes together — supportive and collaborative — and as the business grows and success is seen, more family members want to join in. “Join and work together” is often the mantra. There is typically a sense of a common purpose and a common goal — business success. The early founders work relentlessly to make their dream a reality, and are often less concerned with money. However, when the business grows and “success” in monetary terms starts flowing, family issues frequently start increasing.
For this reason, it is our view that families need to create a culture of
generosity and communication to keep a family and a family business together.
Creating a culture of generosity starts with being generous with:
- And yes, money
Money is often assumed to be the major cause of the rifts in a family, as it is something that’s measurable. But the softer side of generosity — the accommodation of others’ needs, wants, and desires — is just as important. Be available and present for your family members.
When a recipient of generosity acknowledges that generosity, an atmosphere of positivity is created, and a positive spiral can ensue. For example, if a family member cancels a holiday trip because another member of the extended family is unwell and he needs to step in for the sake of the business, his own family time is being disrupted and he might lose money due to the trip cancellation. This type of sacrifice can often be taken for granted by the person who was unwell, as the cancellation of the trip was deemed necessary for the business that feeds everyone. However, if the recipient of this generous act acknowledges it, that acknowledgement will be remembered. And people tend to return favors, thus creating a virtuous cycle.
The other effect of acknowledging generosity is that it lowers ego. Egos are a large contributor to disputes within families. In an atmosphere of generosity, there is more acceptance of another person’s viewpoints. Even if the recipient disagrees, communicating these opinions with people who share a mindset of generosity can create a positive environment.
This practice takes time, but it can be started by anyone; all it requires is believing in it, and evangelizing it. Generosity breeds generosity, and leads to muscle memory.
Creating a culture of communication is also critical. Deciding to build a culture of communication requires buy-in from everyone involved, and a culture of generosity will allow each and every individual to put their dreams and aspirations on the table. It allows for others to take these individuals needs into account, and incorporate them into the ultimate family goal.