Planning, starting, operating and retiring from a family business can be difficult. Issues such as succession and pay, corporate governance and recruiting top talent pose special problems for these kinds of organizations. Rivalry among siblings who inherit a family firm is often the kiss of death for even the strongest family business. Nonfamily members, even those who are senior executives or directors, often feel that the family treats them unfairly or fails to listen to them. In this guide, Dr. Salim Hajje analyzes and provides excellent advice about how to solve such seemingly intractable problems. His suggestions come out of his long experience successfully advising family-run businesses in the MENA region. We recommend this sage and savvy guide to family-business founders, successors, inheritors and nonfamily executives or directors. In this guide you will learn: - What makes family businesses special - What kinds of problems they face? - Why the issue of succession is a major challenge for these businesses - Why family businesses should bring in outside directors to supply disinterested advice

1. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Family
Businesses
Les MUST of:

2. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Les MUST of:
Family
Businesses
Copyright © 2022
Guide by Dr. Salim Hajje Ph.D.,
Strategy Consultant Business Unlimited
Planning, starting, operating and
retiring from a family business can be
difficult. Issues such as succession and
pay, corporate governance and
recruiting top talent pose special
problems for these kinds of
organizations. Rivalry among siblings
who inherit a family firm is often the
kiss of death for even the strongest
family business. Nonfamily members,
even those who are senior executives
or directors, often feel that the family
treats them unfairly or fails to listen to
them.
In this guide, Dr. Salim Hajje analyzes
and provides excellent advice about
how to solve such seemingly intractable
problems. His suggestions come out of
his long experience successfully
advising family-run businesses in the
MENA region. We recommend this sage
and savvy guide to family-business
founders, successors, inheritors and
nonfamily executives or directors.
In this guide you will learn:
1. What makes family businesses
special
2. What kinds of problems they face?
3. Why the issue of succession is a
major challenge for these
businesses
4. Why family businesses should bring
in outside directors to supply
disinterested advice
Family Businesses Are Everywhere
The family business is by far the most
dominant business structure worldwide,
representing 65% to 80% of all firms
around the globe. Ubiquitous, family
businesses are also unique. For
example, many place a high premium
on idealistic values and possess a
strong sense of mission.
Family firms have experienced major
changes in recent years. At one time,
eldest sons almost automatically
inherited control when founders retired
or died. This is no longer the case.
Whereas all family members used to
receive the same pay, most family
businesses now use more conventional
pay systems that take into
consideration merit and performance.
“The overriding characteristic that
distinguishes most family businesses is
a unique atmosphere that creates a
sense of belonging and an enhanced
common purpose among the
workforce.”
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3. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Family businesses face unique
challenges on many fronts, including
ownership, maintaining harmonious
relationships within the family and with
nonfamily executives, planning for
succession and corporate governance.
The problems fall into three categories:
1. Personality – Especially that of the
owner or his or her successor.
2. Structure – The family’s
relationship with the business.
3. Business – Often, no one is sure if
the business’s success or failure is
due to business factors or family
issues.
• “Modernizing outdated skills” –
Many family firms are reluctant to
adopt new technologies or methods.
“We have always done things a certain
way here” is their mantra, as they
refuse to upgrade their methodologies
or systems.
• “Managing transitions” –
Nothing is as important to a family
business as transferring power when
the founder retires or dies. If this
doesn’t happen properly, the firm can
quickly go under.
• “Raising capital” –
Compared to publicly traded
companies, family businesses are
limited in how they can raise needed
funds for expansion.
• “Emotional issues” –
Emotion has no place in a commercial
enterprise. A company’s actions should
arise from its business goals.
Unfortunately, at many family firms,
emotional discord routinely interferes
with the smooth running of the
business.
• “Leadership” –
Decision making often becomes diffuse
at family firms at the second- or third-
generation level – a recipe for disaster
in the fast-moving business world,
where managers must make quick,
dramatic decisions to maintain their
firms’ competitive edge.
Family-Run Companies’ Unique Challenges
“Proprietors...are often the
legendary characters of family
business, with perhaps the most
famous example being Henry Ford
and his dictatorial control of the
Ford Motor Company.”
Family members’ visions for the
company may be limited or insular.
Family businesses face these major
challenges:
Family members’ visions for the
company may be limited or insular.
Family businesses face these major
challenges:
• “Resistance to change” –
Family businesses often live in the
past. Commonly, the founder’s
methods of doing things take on the
status of holy writ, which can hobble
the firm when it faces new situations.
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4. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Family businesses are especially
complex, which can be daunting for
both outsiders and family members.
Their complexity exists on three levels:
1. The business system.
2. The ownership system.
3. The family system.
The culture of a family business often
has its roots in the founder’s
personality, which can be one of three
types:
1. Proprietors – The identities of
proprietors are so intertwined with
their businesses that in their minds,
they are the business. Proprietors
often refuse to accept suggestions
or criticism from younger family
members – or anyone else, for that
matter. Proprietors always want to
be in firm control of the business.
2. Conductors – Conductors are
administrators, and they cannot
conceive of anyone else properly
handling this role. They often put
off dealing with succession issues
until the last minute – or they fail
to address them at all.
3. Technicians – Technicians are most
interested in the creative content
of what the company does and have
little interest in administrative or
executive functions. These, they
delegate. Children who enter family
businesses are almost always
technicians, and they frequently
end up in conflicts with nonfamily
members.
The Complexity of the Family Business
“Women have come a long way in
family business, in step with
increases in the scope of women’s
independent activity and personal
ambition over the past 40 years.”
In family businesses, these normally
independent systems are inextricably
linked, affecting pay issues,
employment status,
psychological/emotional bonds and
legal arrangements. These confusing
interdependencies often result in
conflict.
“Psychologists tell us that
rebellion...is a natural phase of a
child’s development, and when the
parent is also the employer...for an
adult child, this phase may be
repressed.”
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5. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Gender can become a difficult issue for
family businesses. Many families
assume that male children will enter
their businesses and eventually run
them. Female children, however, often
must ask permission to join –
sometimes more than once – or they
must push their way in. Even though
they tend to work more cooperatively
with male founders, who do not see
them as competitors, daughters seldom
take over.
“A father who pressures rather than
invites a son to join the family
business is sowing the seeds of
future conflict.”
Whether the successor is a son or a
daughter, founders should ensure that
he or she receives a broad education
and adequate professional training.
Some successors spend years working in
various departments of the business to
make sure they fully understand all
aspects of it.
“Families learn to build a shared
vision by aligning individual and
family values and goals, and that
vision becomes a guide for planning,
decision making and action.”
Gender Trouble
Evaluate , Monitor
and Observe
Succession Planning
Employee
Competency and
Assessment Grid
Manage
Ongoing Processes
and Action Plan
Training &
Development
Identify
Critical Positions
Development
of Succession and Career
Plan
Key
Succession Planning
Metrics
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6. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Family businesses cannot succeed over
the long term if family members are
suspicious, resentful or openly at war
with one another. Instead, for the
business to thrive and prosper, the
family must face conflicts head-on and
agree on a shared vision for the
business. Consider establishing a family
council to promote dialogue, determine
policies and develop processes for
dispute resolution. Carefully allocate
resources and power to minimize
conflict: Create systems for decision
making, compensation and corporate
governance. A family management
board made up of family members and
outside advisors can help with business
planning.
Family Affairs
“Establishing a board of directors
that includes independent outsiders
is probably crucial for the vast
majority of family businesses if they
are to achieve long-term success.”
You can prevent many problems by
developing a written constitution that
details, in an unambiguous, written
format, the business policies and
procedures upon which family members
have agreed.
Many family businesses are husband-
and-wife partnerships, which are great
when the spouses work together
selflessly as teammates. When they
don’t, however, these business
arrangements can become disasters.
“Members of family businesses
often think they are communicating
in a full and frank manner, but on
many occasions they are not.”
In-laws pose special problems. They
often feel excluded from decision
making. However, some sons-in-law
fare better with male founders than
sons, because of the absence of father-
son rivalry. Sibling rivalry also proves to
be a major problem at family firms.
Extended families frequently become
negative factors in second- and third-
generation family businesses, which is
why most family businesses do not
survive past the third generation.
“Family companies often face a
recruitment problem when seeking
talented outsiders.”
Often, only a psychologist can
disentangle and resolve father-son
conflicts, sibling rivalries and similar
problems. Hold family retreats and
“gripe” sessions to bring interpersonal
problems out into the open. Reduce the
effects of negative emotions by
maintaining professional and
businesslike attitudes.
“As a family business matures,
particularly by the time it reaches
the third generation, it tends to
acquire its own identity, distinct
from that of the founder.”
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7. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
When the founder runs the business, it
often moves steadily ahead. The
problems begin when the next
generation takes over. Thus, the first
question the founder’s children should
ask themselves is, “Should I join the
firm?” The decision is never easy. Some
children feel pushed into joining the
business against their wills – but this
almost never works out.
“The willingness of family company
owners to plan for their succession is
often a decisive factor determining
whether the business survives or fails.”
The Next Generation
Young adults who decide to join their
families’ firms confront numerous
questions: Will the family allow them to
operate independently? Will
expectations of them be realistic? What
will happen to their relationships with
their parents once they come on board?
Will nonfamily executives and
employees relate to them with
friendship or hostility?
“On the dilemma of favoring one child
at the expense of another...‘I would
favor the youngest until he was older;
the one who was absent until he was
present; and the one who was sick until
he was better’.” [ – The Prophet
Muhammad]
Children who decide to succeed their
parents in the family business can gain
experience, independence and self-
confidence by working first in another
commercial enterprise. Nonfamily
managers and employees tend to accept
children of the founder more readily if
they have already “earned their stripes”
on the outside. Because family members
have special opportunities for
advancement and pay increases, which
nonfamily workers find inequitable,
family members should join the firm
with independent credentials and
accomplishments to reduce resentment.
Often, because of the complex
psychological and emotional dynamics
involved, parents are not the best
workplace mentors for their children.
Instead, children should seek out
mentors who are not family members.
Some parents proactively assign a
nonfamily employee to play this
important role.
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8. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Nonfamily managers can help families
run their firms professionally. However,
ambitious executives are sometimes
reluctant to join family firms because
of inherent limitations regarding
advancement, compensation and
control. Others, though, are drawn to
the more informal and less strait-laced
environment of family businesses.
These firms are pleasant places to
work. Many family businesses have
learned that they must provide
nonfamily executives with special
incentives, such as bonuses and profit-
sharing.
Most founders of family businesses do
not want directors, especially
outsiders, looking over their shoulders.
Bringing in Talent from the Outside
However, like other commercial
entities, family businesses require sound
corporate governance and
accountability. Board members should
have written guidelines that explain
their roles and how they will function
together. Nonfamily board members can
contribute invaluable objective advice.
They can provide special talents,
experience and insights.
Family businesses send an important
message to employees, customers and
the business community in general when
they open up their firms to outside
directors: They tell the world that the
firm is a professional commercial entity
that values good advice and analysis,
whatever their sources.
People
Work
Opportunity
Rewards
Organization
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9. The Secret Guide Series™ Family Businesses Copyright© Business Unlimited 2022
Business
Unlimited®
The official business grower©
Business Unlimited, Internationally Certified
Consultant will help You Successfully Design &
run a Long Term Family Business Succession &
Governance
Business Assessment & Recommendations
Profitability Enhancements & Cost-cutting
Strategic Planning & Road Mapping
Multi-Generation Succession Planning
Move Forward Conflict Resolution
Turning Recession into Opportunity Planning
Growth Leadership Development
Wealth & Estate Planning
Organizational – Optimize structure
Human Resource Management
Business Valuations
Family Meetings & Retreats
Family Members’ Career Development Planning
Good Work!
Now if you’re serious about designing & running
a Long Term Family Business Succession &
Governance Strategy, you really need to know
more about how Business Unlimited can help
you reach your goals.
Its where top professionals go to become more
successful...
Please contact us at
03-394 325 / 04-41 60 61
consult@business-unlimited.com
www.business-unlimited.com
This is truly a risk-Free call
Dr. Salim Hajje Ph.D.
Some entrepreneurs who start family
firms think of everything – except their
own financial futures. There are two
ways to handle this issue:
Financial Security for the Founder
1. Withdraw money from the firm
regularly.
2. Let money accumulate within the
firm, with the understanding that
you will financially restructure the
business upon retirement to allow
for an adequate payout to yourself.
Each option has pluses and minuses.
Whichever approach you choose,
employ professional counsel to manage
the company’s financial future and the
family’s wealth. Some consultants
specialize in advising family firms
about finances and other matters.
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