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How to deal with family businesses

As a freelance consultant, it is quite common to work with companies run by a family.
Although “family business” sounds like “small/medium enterprise”, in Germany, Italy and Spain, amongst the top 1,000 companies, respectively the 39.5, 43.7 and 35.4 percent are family businesses (source “Osservatorio Aidaf 2020”).
A major element that makes the difference between family-run companies is whether they opened managerial positions to outsiders or decided to keep full control of the key roles, leaving to external resources only operational/lower-level assignments.
In the first case, it is probably easier to interact with the management: on one hand, the family is already used to deal with outsiders and to delegate tasks and trust them; on the other hand, the non-family members may find in you, as an experienced professional, a precious ally to support their initiatives.
I personally experienced both cases and I would like to highlight the differences and explain the challenges of both situations.
In the first case, I was invited to support a company by their newly hired General Manager, an experienced professional who had the hard task to guide the critical period after the generational change. I worked directly with him, seldom interacting with the family, and this ended up being one of the main problems: several parts of my work were not known to the family members and sometimes arrived biased to their ears. If you are a sufficiently senior consultant, my suggestion is that you try to interact as much as possible with the company owners as they are – in the end – the ones paying for your fee and should see and perceive what they paid for. Of course, the size of the company and the type of project you are involved in are relevant elements to guide the proper level of exposure you should be aiming at.
Another lesson I learned from that experience is not taking sides in family battles. It is important to stay neutral and recognize that your role in the company is giving business advise to the family as a whole, even if there will surely be one of the family members that you feel more like-minded.
Another lesson I learned from that experience is not taking sides in family battles. It is important to stay neutral and recognize that your role in the company is giving business advise to the family as a whole, even if there will surely be one of the family members that you feel more like-minded.
In the second case, I was introduced to a member of the family by a common contact. The direct relationship helped to define goals and expectations in a transparent way and allowed the entrepreneurs to gradually become familiar with an external advisor.
Moreover, working in close contact with a family member, I was able to understand her perspective and business vision and adjust some parts of my job accordingly, to maximize the results.
On the other hand, when interacting with the internal departments that were involved in the scope of my project, I had the feeling that employees looked at me like the “privileged advisor” getting a lot of money to recommend things that they were already aware of.
Even if I had full sponsorship from the family, in that case the hardest part was to obtain the trust of the people and it was an important mission for me, as their collaboration was key to the success of my project.
All in all, working in a family business has its advantages and disadvantages. Whether you're an outsider, or one of the family members in charge, succeeding in a family-run company can be challenging.
In general, pros and cons can be summarized as it follows:

  • A family-run company may have a more relaxed environment, and this can be pleasant for non-family members too. Some companies may treat all of their staff like family, which can create a wonderful personal work environment.
  • It can be easier to make big decisions in a family-run company. Instead of having to wade through multiple layers of bureaucracy, which are common in larger organizations, family-run businesses are often more flexible. If you need approval for a project, you're more likely to get a quick decision.
  • When a family runs a company, the desire to keep things profitable and stable for future generations is usually very strong and this allows to have a consistent vision, not biased by short-term enthusiasms or rich MBO bonuses.

  • If you propose to make changes that in your view will improve the way the company works, you may face resistance by family members. They may see your actions as harmful and they may act conservatively, keeping everything the same.
  • The different opinions of family members can create friction and jeopardize the impartiality of decisions. In particular, the older generation could be stubbornly tied to the best practices that - years earlier - determined their success, regardless of the evidence that times have changed in terms of markets, technologies, customers, ….
  • It's easy to feel excluded and miss important pieces of the big picture, especially if family members are not used to share their conversations with external professionals.

  • Don't take sides: if family members are having a disagreement, aim to stay neutral. Listen to their problems, but don't get involved, or try to solve anything between them – there's often more going on than you can see
  • Understand your position of advisor, aiming at the business results of the company, taking into account the heritage and history and be aware that to deal with families it is required a combination of business acumen and emotional intelligence.

Finally, I think that freelance consultants can take away significant and rewarding experience from working with family-run businesses and, apart from the personal and professional growth, I felt personally proud and honored to contribute to the development of local excellences carried on by strong and visionary families.
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