The family business and its cast of characters

Last month we began a series on family businesses and the ways in which they are unique. We took a look at the problems that can surface when roles taken within the family unit contrast or sometimes trespass on those assumed within the business structure.

This month, we’ll break things down further by exploring the perspectives brought to a family business by its “actors” – whether in a leading role, a supporting cast member or working behind the scenes.

First up, a family member who is an employee but not an owner. Conflict could arise if someone in this category starts to feel a sense of inequality with family members who have ownership and therefore are in decision-making positions. They may feel left out and even resentful if not asked to participate in decisions that affect the company’s bottom line. It’s not always the case, but typically family members employed by a family business generally expect to be treated differently from non-family members.

For the family member who is an employee and an owner, things can sometimes become quite challenging. This individual is typically the founder or chief executive of the business and as such must be able to successfully oversee the business while deal with concerns of family and non-family employees.

Normally falling within the category of family member who is an owner but not an employee are siblings and retired relatives whose major concern is the income provided by the business. They may be resistant to certain business decisions if they feel their financial security could be adversely affected, even for the short haul.

They may seem like bit players, but a family member who is neither an employee nor an owner can place great pressure on a family business. Typically falling into this category are children who may resent the amount of time a parent spends at the business. In-laws are also cast in this role. For example, a son-in-law could play a pivotal role in a family business without being directly involved as confidant to his wife, who is an owner.

Non-family members who are an employee but not an owner may find themselves dealing with issues of nepotism and coalition building and the effects of family conflicts played out within the workplace.

And there are non-family members as employee and owner. Stock option plans have made this category more commonplace among family businesses, particularly if the ultimate goal is to select a non-family member as successor. Employees who share part ownership want to be treated like owners, a concept that could prove difficult for family members/owners to understand and more importantly, accept.

Regardless of its origin, when conflict occurs in a family business, it can characteristically be traced to a disparity in the goals of the individuals, the family or the business. One essential mechanism to both define and align family and business goals is through strategic planning – in essence a mission statement for both the business and the family that allows each element to complement the other.

Next month we’ll zero in on business strategic planning and its critical function in formulating the policies and procedures of a successful family business.

About our Benefits Installment Author: James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”