The Unwritten Rules Of Starting A Family Business

3 min read By eCompareMo on May 19, 2016

Keep the business and your close family ties intact with these tips.

Filipinos put a premium on family and close ties with relatives. But when it comes to doing business, the family can either be your greatest ally or staunchest foe when things go sour.

While family-owned ventures make up a number of businesses in the Philippines—from humble sari-sari stores to the largest corporations in the country—their success is only as good as knowing how to run a tight ship in really tricky waters.

Engaging in one with family members can be complicated, given that there are far worse things at stake than money. What are the unwritten rules family members have to enforce to keep the family business afloat especially in trying times?

1. Communication is key.

It is important for family members to keep an open line of communication at all times. Failing to talk to one another regarding business issues will make things worse for the company. “Talking is the most obvious prescription and the most relevant,” Professor Enrique Soriano III of the Ateneo Graduate School of Business told the Philippine Star in an interview. “When family members stop talking, they stop solving. In a family business, issues never stop. Family members must establish clear and regular methods of communication.”

2. Delegate tasks accordingly.

“Every member has different skills, talents, and abilities,” says an article on Small Business Philippines. “As long as you know your own skills and talents, you could be useful to them and to your business.” When delegating tasks to family members, you need to consider how they can contribute to the growth of the business, not how close you are to them. This way, you can avoid potential tensions within the family and the company in the future.

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3. Set agreements.

Conflicts will surely arise at some point; what matters is you’re prepared enough for them. Establish an agreement between members that will serve as a guidepost for future issues. According to 2010 journal published on MicKinsey Quarterly, “Large family businesses that survive for many generations make sure to permeate their ethos of ownership with a strong sense of purpose. Over decades, they develop oral and written agreements.”

4. Bond outside the business.

Beyond the business’ operating hours, members must go back to what they really are: a family. “We affirm our love, support for each other through bonding outside work,” shares Budu Atilano, Vice President of Kohl Industries. “We take a vacation and that makes us closer. That is why there is harmony between us family members.”

5. Treat each member professionally.

Handling relatives like fragile package is a big no-no when it comes to running a family business. This means that if they need to be under the supervision of someone else, you need to do it. According to American businessman John Luther, “There is a funny dynamic when you have someone who’s managing your children. They have to know they have your backing, and the kids need to know that person’s the boss, too. It lends integrity to the chain of command.”

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6. Go into business only with mature family members.

The problem with entering into a family business is knowing that you cannot fire them—or if you do, it might end up badly. “There is no foolproof way to avoid this risk but steps can be taken to reduce exposure,” said Sam Prochazka of Entrepreneur. “First, make sure that performance expectations are clearly outlined. Then establish strong reporting mechanisms so problems are identified quickly and objectively. Finally, only go into business with relatives with enough maturity to recognize situations when they need to leave (the same goes for you).”

7. Seek outsider help.

Another effective countermeasure against conflicts is getting a trusted outsider. This third party will help in resolving issues and drastically reduce the drama among family members. According to American consultant George Isaac, including “non-family independent board directors or advisors to bring objectivity and an extra degree of professionalism to your board meetings” can help balance the interests of the members as well as mitigate the gaps in terms of skills and capabilities.