Family business Family business

Professional Management

Family businesses need to have adequate professional management practices in place. This is advised to mitigate the risks arising from undefined roles and responsibilities, lack of adequate training and development for family members, and ineffective decision-making practices.


It entails the practice of hiring or promoting family members over non-family professionals. This can lead to demotivation, low accountability, and resentment among non-family employees.

It is important to note that not all instances of nepotism are not harmful. In some situations, family members could be the greatest candidates for a post since they have the appropriate qualifications and expertise. To prevent the risks of nepotism family enterprises must have clear policies and processes in place to consider the contribution of both family and non-family professionals in the business.

Change Management

Family businesses can exhibit resistance to change, often hesitating to replace conventional practices or update processes/technology. This can make it difficult for family businesses to adapt to new market conditions or technological changes.

Financing the Business

Many family businesses tend to be reluctant to explore external funding opportunities as they fear loss of control of the business or dilution in their ownership stake. Therefore, financing long-term business ideas or scaling up the business becomes a constraint, thereby limiting the growth / diversification of the core business.

Trust and Control Issues

Founders and owners of family business might be reluctant to appoint non-family professionals for important positions in the business due to several reasons like fear of losing control, lack of trust, fear of failure etc. However, there are several global family businesses that have experienced success by appointing non-family professionals to critical positions in their companies.


The absence of sharing vital information among family members can impede informed decision-making for the business. It can also create trust issues and lead to confusion / delays owing to different viewpoints based on limited information. Attracting and retaining external talent can also be another challenge, as accomplished professionals tend to value a transparent and open organizational culture.

Managing Differences

When family members work together, there is a possibility that personal disagreements among family members spill over into the business decisions. This is more likely when there is a high diversity of age group and number of generations in a large family. It is important for family businesses to have necessary support systems in place to proactively address minor differences before they escalate into major disagreements.

Succession Planning

The absence of a well-defined succession plan can complicate the continuity of the business in the event of the sudden passing away of the founder or current family leader. Moreover, nurturing next generation to develop into capable future successors is also an important factor.

Family enterprises represent a distinctive business model characterized by complexity and vulnerability to risks due to multifaceted roles and familial connections. Nevertheless, they can achieve success by identifying and effectively managing these risks.