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February 2021 < Back

Professionalization of Family Business

When we hear about "professionalization" of the Family Business, does it mean "changing from family management of a business to non-family (read professional) management"? Can a company be family-owned & managed and still be professional? Can a family-run business promote nepotism (favor relatives in employment) and still have a professional organization?

According to Prof. John Davis (Founder and Chairman, Cambridge Family Enterprise Group), many industry leaders around the world are family companies and are doing many things right which are good examples of professionalism. When family owners and business leaders are good stewards of their businesses and encourage high levels of performance and ethics in their businesses, this is an indicator of "professional" management.

A professional family-run business is characterized by high internal standards of performance and ethics, which they strive to achieve consistently. The family business need not shun nepotism as family members with the right set of qualities/qualifications can emphasize performance, adherence to core values, constantly learn and strive for fairness and consistency in rewards. This can further improve professional standards of the company.

As the family enterprise starts growing in size and the involvement of number of family members and generations increases, it is inevitable to professionalize the family business in order to remain competitive in the long run.

Approaches towards Professionalizing the Family Business

  • Communicate clearly and frequently about the family's vision, values, and goals to align all stakeholders viz. customers, suppliers, employees, shareholders etc.
  • Strengthen family discipline and commitment towards the business with a stewardship mindset
  • Draft policies and procedural guidelines to formalize work processes or rules for timely decision-making & empower a management hierarchy for certain types of business decisions
  • Set up a board of directors that includes few or several outside directors to further enhance professionalism to the organization's culture
  • Create Systems to ensure meritocracy and fairness culture

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