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Different Kinds of Players in a Family Business & How Their Priorities Can Affect the Business: Ameen Ahsan, The Strategy Advisor

Family businesses form the backbone of the economy in many regions, particularly in the GCC countries. These enterprises face unique challenges and dynamics due to the diverse priorities of the various stakeholders involved. Understanding these dynamics is crucial for ensuring the continuity, professionalization, and crisis management of a family business. In this article, we will explore the different kinds of players in a family business and how their diverse priorities can impact the business. We’ll also discuss strategies to ensure the business’s success.

Types of Players in a Family Business

Family businesses typically have a complex structure with various stakeholders, each having different roles and priorities. Here are the key types of players commonly found in family businesses:

  1. Family Owners Who Are Employees
    • Example: Founders
    • Primary Interests: Increasing the value of the company, ensuring longevity over immediate ROI, performing meaningful work, and being caretakers of the business, its people, and its values.
  2. Non-Family Employees
    • Example: Non-Family CFO / GM etc
    • Primary Interests: Salary, incentives, benefits, career progression, and job security.
  3. Non-Family Owners
    • Example: Outside Investors
    • Primary Interests: Increasing dividends and the overall valuation of the company.
  4. Family Members Who Are Not Owners or Employees
    • Example: Spouses of Owners
    • Primary Interests: Protecting the family from harm, and ensuring employment opportunities for their spouses or children.
  5. Employees Who Are Not (Yet) Owners
    • Example: Sons or Daughters Who Joined the Business
    • Primary Interests: Building a career and aspiring to become owners of the business.
  6. Family Owners Who Are Not Employees
    • Example: Retired Founders (Father)
    • Primary Interests: Increasing dividends, ensuring the company’s valuation, and continuity to the next generation.
  7. Non-Family Employees Who Are Also Owners
    • Example: CEOs Given Equity Share
    • Primary Interests: Salary, incentives, benefits, career progression, job security, and increasing the value of the company.

How Diverse Priorities Affect the Business

The diverse priorities of these stakeholders can lead to conflicts and challenges within a family business. Here are some common issues that arise:

  • Conflicts Over Business Direction: Founders and family owners may prioritize the long-term value and legacy of the company, while non-family employees and outside investors might focus on short-term financial gains.
  • Succession Planning Issues: Family members aspiring to leadership roles can create tensions, particularly if non-family employees or other family members feel overlooked.
  • Differences in Management Style: Family owners may have a more personal and informal management style, which can clash with the professional approach expected by non-family executives.
  • Decision-Making Conflicts: Diverging interests among stakeholders can lead to disagreements in strategic decision-making, affecting the overall business performance.

Ensuring Business Success

To navigate these challenges and ensure the success of a family business, consider the following strategies:

  1. Clear Governance Structures: Establishing formal governance structures, such as family councils and advisory boards, can help in managing conflicts and making strategic decisions.
  2. Transparent Communication: Open and honest communication among all stakeholders is crucial for understanding and addressing their diverse priorities.
  3. Professionalization: Bringing in professional management and advisors can help balance the emotional and rational aspects of business decisions.
  4. Succession Planning: Develop a clear succession plan that includes input from all relevant stakeholders to ensure a smooth transition of leadership.
  5. Alignment of Interests: Create incentives that align the interests of family and non-family stakeholders, such as performance-based bonuses and equity shares.
  6. Education and Training: Providing ongoing education and training for family members can help them understand the business and prepare for future leadership roles.
  7. Conflict Resolution Mechanisms: Implement mechanisms for resolving conflicts, such as mediation or arbitration, to address issues before they escalate.

Conclusion

Understanding the diverse priorities of the different players in a family business is key to navigating the complexities and ensuring its success. By implementing clear governance structures, maintaining transparent communication, professionalizing the management, planning for succession, aligning interests, providing education, and having conflict resolution mechanisms in place, family businesses can thrive and achieve long-term sustainability.

For more insights on family business continuity, professionalizing family business, family business crisis management, and family business advisory, visit ameenahsan.com.

 

Family Business Advisory Service by Ameen Ahsan  

To Know More About How Ameen Ahsan Can Assist Your Family Business, please watch the video https://youtu.be/qOHVL8GgIXY?si=RRkqwUxMUZEB5Yg3 


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