Thinking about joining a family-owned company? Watch out for stormy waters!

What to consider before joining family-owned company.Many wonderful small businesses around the world, from restaurants to product manufacturers, are run by families.  In my opinion, these companies have a lot of longevity built into them, because exit strategies rarely cross the minds of founders, and family ties keep the employee retention rate high. But, there is the caveat: family businesses are great… if you are a member of the family.
If you are an outsider, there are several dangers:

  • Blood is thicker than water. If push comes to shove, you will be shoved.  Even if you are the most productive employee, you are not family, and fairness and professional treatment may not be extended to you.
  • Family politics = major distraction. There is unavoidable family baggage on top of regular office politics. Are you politically savvy enough to survive?
  • Nepotism. Merit is rarely a criterion. Enough said.
  • Sibling rivalry. Even Baby-boomer founders can act like kids, and I have seen grown men get into pissing matches that even teenage siblings can’t top.  This can kill a company.
  • Family traditions. Being an innovator (without the founders’ or major shareholders’ voting rights) is not an easy feat. Family ways can infiltrate the business and add an additional hurdle to innovation. Are you ready to push that boulder up the mountain? Have you heard of Sisyphus?

Just to be clear, there are some very good family-run companies that treat their non-family employees with absolute respect. If the company is run by a meritocratic matriarch or patriarch, you just may be in luck. I worked for my father when I was a teenager, and he did not cut me any slack for being his son. I have also heard of several examples of family-run companies that did reach an exit event (sales, merger, etc.) and shared the wealth with ALL their employees. So please don’t be discouraged if you get an offer from a family-run company, but do take the following safeguards into consideration to save your bacon:

  • Cash is king! Get paid and don’t get enamored with equity BS. Now don’t take me wrong, I would never turn down equity, but I also know to value it like lottery tickets. A family-owned business provides job security to family members, so you are very unlikely to partake in any kind of juicy sale of the business?  Profit sharing trumps equity in this case.
  • Who has how much of the pie? Pay special attention to the distribution of voting rights. The best situation is when the majority of the voting rights are held by one family member. If you have a parent and several siblings with equal rights, think twice, because decision making will take forever and tough choices may never be made.
  • Do the job, deliver the value you are paid for… but don’t forget, you are not family. You can be the superstar, but it will not be enough. Keep your network fresh and eyes open and have a clear exit strategy in place.

If you have worked for a family-owned company, please share your observations in the comments section.

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