MINES’ communication theme for July is “Fortifying the Family.” For BizPsych, this theme in particular brings up some fascinating thoughts regarding organizations and organizational development/business psychology. Many of our clients like to think of their businesses or their teams as a “family.” Typically this is when things are going well or were in the past – “we used to be like a family.” I suppose that means that when things are not going well it is like a dysfunctional family, although since none of us really want to associate with that we tend to say “we are no longer like a family,” or “we have lost the family atmosphere.” Even in these references it is clear that a business may feel like a family, but is not a family. In this post, I would like to explore some of the important differences and similarities between family and business.

First, what are the essential differences between family and business? Here is a quote from The Family Business Magazine (Summer 2011 issue):

“… families by definition are the bearers of legacy. Their mandate is to perpetuate and teach familial characteristics – beliefs, morals, assumptions, standards, history, trauma, intimacies, triumphs and failures of past generations. The difficulty lies in the dissonance between these characteristics and what is required for success in the business world.”

The current Wikipedia definition of “business” is as follows:

“A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers.[1] Businesses are predominant in capitalist economies, in which most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.”

These are vastly different basic foundations. What is the mission or purpose in a family as opposed to the mission of a business or organization? In my view, a healthy family provides support to each individual within the context and relationship to the roots and primary environment of that individual.  One of the essential purposes of the family is to create a bond and environment that supports the success of the individual and helps perpetuate a legacy to the future. In the case of a business or organization the primary purpose is to foster the success of the business in meeting the need of its clients or customers. The ultimate goal of the business may be to make profit, or in the case of nonprofits, to maintain and grow the capacity to serve the needs of its clients and the community.

This essential difference leads to what is targeted as a primary difference between family and business and that is the principle of loyalty.  Interestingly enough, this is a principle that has shifted significantly in business in the last thirty years. It has become evident that businesses cannot and do not maintain loyalty to its members (i.e. staff) at the expense of the “bottom line.”

But saying your business is like a family raises expectations that most companies are unwilling to meet. As former New York Knicks coach and basketball commentator Jeff Van Gundy told the New York Times concerning the rash of NBA coaches already fired this season: “It’s always intriguing to me that everyone preaches we’re all in this together, we’re a family. The difference is we are in this together only when it’s going good.” (Fredric Paul InformationWeek December 17, 2008 05:05 AM).

One of the first things families do when they bring a child into the world is to sacrifice one of their most precious assets i.e. sleep for the benefit of their newborn. That is loyalty. The marriage contract typically asserts, “in sickness and in health… till death do us part.” Families stick together “through thick and thin.” Of course this is not always nor should always be the case. Couples divorce, family members become estranged, and teenagers sometimes get “kicked out of the house.” However, this is typically not because of lowered productivity, substandard performance, or to maintain profit margins. We have recognized that in many cases maintaining loyalty over excellent performance can be extremely damaging to business and the organization. Often times in families, loyalty over performance yields positive results for both the individual and family system.

Then there is the middle ground i.e. family business. Much has been written on this topic as well. Several of my consultant friends specialize in family business consulting.  Herein may lay the key to understanding some of the essential differences. Typically the articles on this subject differentiate private business from family business. Here are some of the differentiating characteristics that have been identified between family business and “private business:”

  1. Different Goals: Many times small business owners may have different goals other than their company’s success. There may be certain charities which the owner feels strongly about, but, cost the company more than it can afford. Publicly owned companies are not in position to do this, because of legal reasons, and negative criticism that they will receive.
  2. Nepotism: Sometimes the owners of family businesses feel an obligation to hire family members rather than hire someone else who may have better credentials. This causes many problems, and can even cause a company to go out of business. There are sometimes fights within the family.
  3. Less Profit Margins: Public companies have an easier time producing mass number of items, and thus they can get larger profit margins. Mostly the profit margins are twice as large in public companies.
  4. Less Care about Profits: Many small business owners, specifically family businesses, have a tendency to search for non financial things. They often try to do things that don’t bring profits to the company. They will often try to lower their price to make there customers happy, even though they can’t afford to do so which is not the right business strategy.” (John Elton Article from articlesbase.com)

The article goes on to identify some of the strengths of family-owned businesses:

Strengths of family-owned businesses:

  1. Teamwork: In family businesses members don’t doubt other’s intentions because they are related, and thus working for a common purpose. In public companies however they may try to do things that hurt others in order to get ahead and gain promotion.
  2. Greater Sacrifice: In family businesses family members are often willing to work longer hours with efforts for less pay, because they know that they are doing it for the family, and that they are making the company stronger for their kids and grand kids.
  3. Loyalty: In family businesses it is rare to find turnover, specifically in management, which makes it easy to keep employees for a long period of time, who know what they are doing. In non family businesses employees/managers will often go to a different company for better services and salary and may start off their own company in direct competition to yours. Even if a family member does decide to quit their job, it is very unlikely that they will compete against you.
  4. More Concerned Employees: In small family businesses the employees are concerned about their company’s success rather than their own success. In public companies the employees often just expect to work for a 40 hour workweek, and then go home, not thinking about their job until when they go back the next Monday. The commitment difference is seen from this.

It is necessary that small businesses recognize their strengths and weaknesses so that they are able to move in the right direction.  (John Elton Article from articlesbase.com)

In sum, there are many essential differences between a “healthy family” and a “healthy business.” It is important to keep these essential differences in mind lest we create expectations that are not realistic or helpful to the business (or to the family for that matter). It is also important to recognize some of the similarities and characteristics that are constructive in both families and business.

Consider these tips for communicating with aging parents from ones of MINES’ July newsletters: (Source: Parlay International ©2010 from MINES and Associates’ July 12, 2011 Weekly Communication)

  • Set aside appropriate times to talk
  • Talk about one thing at a time
  • Equal time for talking and listening
  • Avoid blame
  •  Avoid exaggerations
  • Focus on problems and solutions

Hmmm, this is an article about family, but seems to identify some of the communication tips we often share with managers and employees in business. Seems it pays to be mindful of both the similarities and differences between family and business – whether private, public, or family-owned.

Patrick Hiester, MA, LPC
Vice President, BizPsych