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Family business: Caged in

Thursday, March 19, 2015

One of the more disturbing images to which we are increasingly exposed on television, print media and social media is people held against their will in cages. They may be innocent journalists dressed in white and being tried in Egyptian courts, or orange clad captives of terrorist groups. Whatever the circumstances and the clothing, the message is that these people have no agency to act on their own behalf and are trapped by and in systems to which they do not subscribe or even belong. 

While we may not react as viscerally to these pictures as we do to reports of beheadings or immolation, most of us are taken aback and even repulsed by seeing humans so cruelly confined and treated.

Invisible cages

While the parallel may appear extreme, I am often saddened when I encounter, in my practice, family members who are in invisible cages; trapped in the family business system. There are those who work in the business and feel they had no choice but to join the firm. They felt obligated to “help out” as their parents were swamped and needed them, or so they were told. 

In some cases, sadly, illness or death created a vacuum into which they felt compelled to step. These offspring were often propelled by a heavy sense of obligation to the family. They put aside their personal aspirations and careers to enter a business for which they may not feel any passion. Indeed some of them may have already been on a different career path when they were summoned back or “decided” to return from university or a dream job to hold down the fort. 

Admirably, many of these people are able to function fairly well and make worthwhile contributions to the business. They move past the disappointment of unfulfilled dreams and embrace their role in the family business system. Their cages are big enough to encourage wide movement and they lose their sense of confinement as they broaden their vision of self and develop a sense of purpose within the family and the business. 

Occasionally, I get a sense of wistfulness when they refer to a long-buried ambition. I have seen some of them seek to combine their long lost world with their new reality. They create hobbies or pursue on-line studies in their original vocation. The more daring among them sometimes try to include their original path into their work by pursuing a new division or acquisition within the business. That could be a dangerous path, though, and I am wary and sceptical, even as I feel sympathetic when I observe such actions.

From captives to captors

This scenario is more prevalent in first generation businesses which may not have yet implemented systems to avoid that crunch. The business has not progressed to a stage of growth and professionalism where non-family management is empowered and held accountable by defined shareholder goals and external oversight. 

The best outcome is when that generation of family members seeks to ensure that the business is set up to avoid another generation facing that soft imprisonment. The most valuable family member employees are those who are exposed to other options and want to join the business. They are excited by the opportunity the business presents and cannot wait to make their mark. Yet, in too many cases, the captives themselves become captors in later life and impose similar obligations on their own children. It may be a subtle approach born out of unconscious adherence to their life story but undesirable, nonetheless.

The more disturbing situations are those where family members “willingly” join the business solely as a means to protect their inheritances. They think that if they do not “work” in the business, their parents will not look kindly upon them in share and wealth distribution so they are trapped in the business while waiting for a senior person to die. The business becomes a cage out of which they will escape when they get the shares and/or money. 

The reading of the will is tantamount to break-out. These are the cases that could well destroy value in the business. In those family firms, we not only have square pegs in round holes of employment but the business becomes a parking lot. Family members are given a substantive post with attendant remuneration and they function at much less than capacity. They ‘work” part time in a full-time job and cheat the business, the family and, ultimately, themselves. Siblings and cousins jostle for jobs for which they are ill-suited and it becomes a power struggle to see who gets closest to the bars of the cage.

The parents frequently close one eye when they observe their offspring behaving in this manner and tell themselves all kinds of stories to avoid the ultimate disappointment. 

Often though, they have sent the signal that the only way to benefit from the family business is to work in the business. The business does not distinguish between family employees and family shareholders and benefits are collapsed. Family members who do not work in the business are treated as second-class citizens, or made to feel excluded from a special club. There is no recognition of the role and rights of passive shareholders as compared to active shareholders who work in the business. 


Free at Last

Happily, I am noticing that in my practice, more family business owners are cognisant of the traps that such behaviour sets and are acting to free the business and the family from those restrictions. They are making the necessary distinctions between family employees and family shareholders; and between family members who work in the business and those who chose a different path without prejudicing either group. Yes, it requires a more sophisticated way of functioning, more transparency, accountability and defined policies that may at times appear onerous. 

The benefits far outweigh the costs, though. Ask any freed man or woman.

Dr Annette Rahael is a family business adviser. Feedback can be sent to: [email protected]



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