Issues and Problems in Family Business

Family businesses are often criticised for their lack of professionalism in dealing with environmental complexities more efficiently. Intervention of family in the business affects business-like responses to various situations of opportunities and threats. As a result, more and more family businesses are getting into trouble. Problems that most of the family businesses get into are: conflicting business and family norms; rivalry among family members, professionalisation and problems of continuity. In the past, these problems have led even the most successful enterprises into severe problems causing sometimes the collapse of business enterprises. Some of these issues and problems are discussed here:

i) Business vs. Family

Family businesses very often face this unique dilemma to make a choice from alternatives that is best for the business against the family norms. Given this choice, decisions are very often made in the interest of the family and not business. Values, norms and principles of the family are incongruent with that of business. This leads the family business to operate under the normative ambiguity. Human resources and growth opportunities are adversely affected due to this conflict. With regard to human resources, family management due to its obligation towards the family select, promote and compensate family members and relatives considering relationship/kinship as a major criterion.

The family norm of providing help to relatives by way of giving them employment often encourages incompetent persons getting priority over qualified professionals.

Similarly, compensation is determined on the basis of the position of the relatives in the family and their needs whereas the business norm is to compensate according to one’s merit and competence. Even in the case of appraisal, family members are appraised on the basis of their standing in the family rather than performance.

Training and development of employees should be done as per the needs of the...