Rules for working in a family-owned business

Last updated 13:34 22/11/2013
Just Water International chief executive Tony Falkenstein says it comes down to the psychology of the owner.

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Tension and conflict soon arises when senior executives join family-owned businesses.

Business Psychology principal consultant Richard Motet said in most cases the relationship "ends in tears".

Feedback from clients, whom were family-business owners, included: "I want a slave with a good attitude".

"I want a dog who can bark, but not at me."

Owners saw their business as a reflection of themselves and were therefore reluctant to accept criticism or suggested changes, he said.

Just Water International chief executive Tony Falkenstein said it was a case of saying: "I may not like the way they do things, but they do work."

He gave the example of one chief executive he hired.

"I'm not a big spender, I don't really do flashy lunches, but this guy would fly people up for the Sevens, and wine and dine them at expensive restaurants."

Although this made Falkenstein "shudder", he had to acknowledge that it was a successful move for the company both in terms of the clients the executive brought in and the relationships he built.

Falkenstein said this was because he was able to step-back and acknowledge that this is best for the company.

"It comes back to the psychology of the owner."

"I like doing new things. As long as they're hitting the KPI (Key Performance Indicators) then I say hey they have a better way of doing things."

Unfortunately, industry experience tells Motet that many family-business owners were less open to this.

He said, instead tension and conflict often arose from differing perspectives and focuses.

Executives would be focused on the bottom line, which was often not the way the family do things, he said.  

He gave the example of capital investment.

Unlike other businesses, capital invested in new machinery or refinancing the business would come directly from the owner's own pocket, he said.

"Although they're asking to use money to invest in a new machine to help the business, this means the family can't go to Cancun for Christmas this year."

Employment Law Advocacy employment advocate Daniel Gelb has previously worked as a general manager in two separate family-owned businesses.

He maintains a good working relationship with the owner of one of these, but not the other.

"It did end in tears. Partially due to a difference in opinion."

He said the main difference between a family-owned and corporate entity was the reporting structure.

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"In a corporate company there is a clear hierarchy and chain of command. In a family-owned business, the reality is the head of the family is at the top of the business and everyone else is one layer below."

Motet suggested owners hiring go through a facilitated process to assess whether they could work with the executive.

"They're [executives] not simply entering a business; they're entering into a marriage with all the family politics and consequences."

Gelb said it all came back to the golden rule.

"He who has the gold rules."

- Fairfax Media

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