Walmart. Novartis. Nike. Facebook. Roche. What do all of these big name companies have in common? They all started as family businesses. If you’re thinking of working for a family business -- your own or someone else’s -- you may have some extra things to think about. Here’s a closer look at what you should know.
A Big Impact
Defining the concept “family business” isn’t as straightforward as you may think. Red Rocket Ventures managing partner George Deeb contends, “ A family business is one where one family owns the majority of the company (and most likely 100% of the equity), and often has one or more family members operating in the management team.” Business Insider, meanwhile, adopts a broader stance by including businesses with family-owned stakes of at least 20 percent under the heading of “family-owned business.”
The takeaway? While it’s true that some family businesses have staffs that can be counted on one hand (and that there are benefits to that), some are much larger (with their own unique benefits). And when you add them all together, they’re a major economic force.
Proposes Tharawat Magazine, “The family business is the most frequently encountered ownership model in the world and their impact on the global economy is considered to be significant. Despite their great number, the academic and business community have yet to define uniformly what exactly constitutes a family business. The long-running debate has never garnered conclusive results. When defined as businesses that are majority-owned by a single family’s members, it is estimated that the total economic impact of family businesses to global GDP is over 70%.”
The Pros and Cons of Working for a Family Business
Tharawat Magazine also identifies several benefits involved with working for a family business.
For starters, family businesses have proven to be more profitable over the long run than their counterparts. They are also more likely to continuing hiring (and less likely to make layoffs), even when an economic downturn is looming. For philanthropically minded employees, family businesses are also attractive due to their inherently community-based outlook: family businesses are more likely to give back within their surrounding communities. Lastly, family businesses are known for having more strategic outlooks due to their legacy-oriented motivation; correspondingly, they are also more likely to be financially prudent and to raise less debt.
On the downside and despite these promising attributes, family businesses face harsh odds: Just 30 percent of family businesses make it to the second generation; 12 percent continue onto a third generation; and three percent survive to the fourth generation, according to statistics from the Family Business Institute.
Evaluating a few key considerations can help you decide whether or not to pursue work at a family business.
Of course, a major consideration is whether or not it’s YOUR family business. Working alongside your family members while carrying on (and adding to) tradition can be immensely rewarding. You also have the hope of taking it over one day without necessarily having to work your way up. In fact, many second- and third- generation employees move directly into management positions after graduation. This is particularly noteworthy is you’re a woman. Reveals Valuewalk, “According to the Mass Mutual American Family Business Survey, about 60 percent of all family-owned businesses have women in top management positions. By comparison, of the non-family firms in the Fortune 1000, only 2.5 percent are led by women, according to Fortune magazine.”
Furthermore, when it’s your family business, you have unique pride in -- and immediate stake in -- the business. And then there’s the fact that joining your family business also gives you a legacy to leave to your own kids.
This isn’t to say that joining your family business is easy. Deciding to join your family business for the wrong reasons is a major pitfall that can ultimately leave you feeling trapped. And then there’s the whole working-with-your-family thing. All families have baggage; when this baggage shows up in the workplace, it can lead to personal and professional problems.
If it’s not your family business, meanwhile, another set of issues merits a closer look. The environment found in family-run business can be particularly supportive; it can also offer appealing job security. Says India’s Economic Times, “Since the family wants sustainability of business, they have hired you for the long term. Your loyalty will be reciprocated and you have a job for life if you want one. As a competent professional struggling in a volatile environment, a role at a family-run business reduces your career risk.”
However, just because you’re not part of the family doesn’t mean you won’t be subject to family politics as an employee. Because family businesses groom family members to take on management roles, you may at times feel frustrated with the hiring hierarchy. Additionally, opportunities to contribute and advance to leadership positions may at times feel limited.
The good news? Whether or not it’s your family business, the solution can be the same. First, do your homework. Recommends Deeb, “Always lean toward family-owned companies that have professional outside boards of directors or advisors that can help keep the family executives educated and accountable on the best ways to realistically build a business. Equally important, make sure the family actually considers and follows through on those improvement plans.” Open lines of communication are also paramount. Addressing your concerns up front can help you fully understand the opportunity (and any potential obstacles that might arise along the way) in order to make the most informed and auspicious career choice.
Are we moving away from globalization and toward protectionism? Not if you look at business school curricula. Here’s a closer look at the state of g...
Leaving your home country once as a refugee is hard enough. Now imagine relocating again four years later to be with the person you love. This is exac...
Want to earn the trust of millennial consumers? Check out the top companies that millennials trust the most.