Family First vs. Business First

“Family first” and “business first” companies differ in the ways that the desires of the family and the needs of the business are prioritized.  In most family first businesses, the concerns involving family are often mixed in with business and vice-versa.   Companies with clear lines between the family and business affairs tend to be more “business first.”  In most first generation buisnesses, the family and the business grow together and borders between the two can become muddled.

Family First – Family first companies generally emphasize the needs of the family over what is best and most productive for the business.  There usually are no set boundaries between family issues and business issues.

  • Only Family Successors – Family members have a strong emotional attachment to the business.  The business becomes linked to the family’s identity.  Bestowing leadership usually is based on seniority rather than ability.  Typically the oldest son will become the company leader, sometimes an oldest daughter, but usually the younger children will not be considered, even if they are more qualified.  Longevity is more valued than skill.
  • Excessive Perks – The family business can become the family checkbook.  Business money is used for purchases such as cars, homes, boats, and travel, business and non-business related.  People see the business money as their own instead differentiating between compensation and company revenue.
  • Non-Performance-Based Compensation – Compensation is not distributed based on position, education, ability, or performance.  Family members all receive around the same pay, regardless of impact on the overall success of the company.
  • Automatic Jobs – Family members are given a job within the company no matter their skills or abilities.  The business becomes a safe haven for kids whether they are well qualified or not.
  • Conflict Avoidance – Families tend to avoid conflict and prefer to do whatever it takes to make everyone happy.  Small issues get swept under the rug, which leads to negative feelings and resentments later.  Poor communication is typically a problem.

Business First – Business first companies have a clear set of boundaries between family issues and business and do not let the two intertwine.  The best interest of the business is a priority.

  • Qualified Successors – The difference between family and business is understood by all.  Leadership is earned, not bestowed.  The company is passed down to the best and most competent person, and outside people are sometimes brought it.  Higher-up positions are given to those who are qualified and experienced.
  • Personal/Business Spending Separated – Cash flow generated from the business is used to build business and drive value, the resources are not stripped by members of the family.  Family members receive compensation based on their role in the company and distributions of profits based on ownership and business capital needs.
  • Market Based Compensation – Compensation for members of the family is based on position, performance, track record and responsibility.  Being a member of the family does not necessarily lead to higher pay.
  • Job Skill Requirements – There is usually a family employment policy with requirements regardding education , outside work experience, etc.  The brightest and best are hired to fill all positions.
  • Set Communication Guidelines – Since there are clear boundaries already established between business and family matters, methods are created for apppropriately resolving conflict.  Family problems are kept at home and business issues are settled at work.