The Death of the Chillura Family Business

I was not disturbed by a post on Nepotism in the Harvard Business Online, but feel that I must talk about it. Although it was written in August 2007 it was featured the morning of October 17, 2007 in NPR. While I agree with many of the sentiments about nepotism I think there is a distinction to be made between Nepotism and a family business. A distinction which Gill Corkindale, the author of the post, does not go into at all. Let me present you with some very strong statistics about the importance of family business in the USA, from a Business Week article:

Some 35% of Fortune 500 companies are family-controlled. Family businesses account for 50% of U.S. gross domestic product. They generate 60% of the country’s employment and 78% of all new job creation. Therefore, we can see that family businesses are extremely important to the american economy, and are part of what makes America what it is today. So how do you reconcile a family business and these negative attitudes and stereotypes with nepotism? You can not pass a family business from one generation to the next, unless family members work and run the business. Family succession planning is very important to the health of a family business. Good family succession planning means the difference between a healthy business that keeps growing and running from one generation to the next, and a business that burns out and fails, or worse gets sold out of the family (often for a bargain price in which the family business is dissolved for assets).

I think there are right ways to bring family members into a business, and there are wrong ways to do it as well. But I don’t agree that all nepotism is bad, and that family members should never hire other family members. I think its a strategic dance, and it has to be done for the good of the business, but it can be done well. And when it is done well it means the difference between the life or death of a family business.