It might be the most important question that anyone working in their family’s business can ask.
And yet, very few of us actually do.
Is it really a family business?
The question might seem too obvious to even entertain at first glance, but I assure you that there are crucial differences between working in your family’s business and working in your family business.
And that distinction is one that I personally had to learn the hard way.
What makes something a “family business” isn’t just that it’s owned and operated by someone (or multiple someones) in your family, even across generations.
There also needs to be an appropriate approach to ownership and governance in order to truly qualify, and your father/mother/relative acting according to their whims isn’t it.
This is part of the reason why the famous Three-Circle Model was such an important innovation in the academic understanding of family business. It recognized that simply looking at the intersection of the business and the family offered an incomplete picture of what makes the family enterprise distinct.
If that “third circle” of ownership and accompanying governance isn’t properly defined and delineated, it’s possible that it might not be a true family business at all.
I try not to get into too much personal detail in these pages, because I think it’s more important- and interesting- to write about the often striking similarities that we share as NextGens, but my own experience here is actually quite illustrative.
In my family’s case, our company did have some level of a governance system in place, but ultimate authority rested with one person (my father).
So he could, and did, simply change his mind about a particular policy or decision, and do so unilaterally (without needing approval from a board, or be put to a vote, or any other kind of governance process that might be typical in other companies).
This was extremely frustrating for me, because it made me feel powerless, and that I had foolishly tried to adhere to a way of doing things that my father could just arbitrarily change his mind about with no notice or explanation.
And when that happens at what you think is your family business, it can be really difficult to accept.
Because you’ve probably grown up thinking of the business as maybe not quite a birthright, but certainly as something that’s part of your identity as a member of your family. So to be told that you really have very limited- if any- agency can truly be a shock to the system.
It was to me at least.
I vividly remember the “aha moment” I had when telling a prominent family business consultant about my frustration at the way my father made some of his decisions.
The consultant listened and asked me some questions about governance at our company. Is there a board? How is ownership concentrated? What are the policies on family employment and compensation?
After I had answered, he looked at me and diagnosed the root of the problem in a way that no one ever had before.
The issue, he explained, was that I had grown up and carried with me a sense of duty and loyalty to what I thought was my family business, but that when I had described the way the company worked to him, it didn’t sound like it actually was a family business, at least in how he defined it.
It sounded like more of a sole proprietorship, run by my father, that maybe had been in my family for multiple generations but didn’t otherwise have the processes, policies, or even openness to basic governance concepts to properly function as a healthy family enterprise.
I remember not wanting to accept his explanation (could I have been thinking about this important part of my identity wrong for pretty much my entire life?) but immediately realizing that he had hit on something quite profound.
For my father, and I think this would go for a lot of family business leaders out there as well, our company was more his business than a family business. And when that’s the case, what might be the right thing from a family business perspective will always be secondary to what the individual (or individuals) in charge wants.
Now every situation is obviously different, but I have no doubt that there are many other NextGens out there who think and very much care about their family’s business in deeply personal terms, and who would be more than a little surprised to learn that it might not quite be the family business that they’ve always believed.
That doesn’t mean it’s too late for anyone in such a position. Ownership and governance systems can change and evolve with time, and recognizing the gaps that currently exist is the first step to figuring out how to fill them, assuming there’s a willingness to do so.
And it starts with understanding whether it actually is a family business.