Tue | Nov 28, 2023

Lawrence Nicholson | The ‘people person’ HR fallacy permeating family businesses

Published:Wednesday | January 25, 2023 | 12:29 AM
Lawrence Nicholson
Lawrence Nicholson

One of the characteristics of family-owned businesses, FOBs, is their tendency to be internally focused, especially with respect to giving preference to family members in key areas of the business. This is usually defended on the grounds that “...

One of the characteristics of family-owned businesses, FOBs, is their tendency to be internally focused, especially with respect to giving preference to family members in key areas of the business.

This is usually defended on the grounds that “family members can be trusted” and the need to “keep the secrets of the family business”.

Key areas of the business identified among FOBs in the Caribbean include accounting (interpreted to mean management of the money); product formulation (‘secret ingredients’ in the products); and human resource management or HR. This article focuses on HR, given its inextricable link to the other key areas.

There is a risk of failure of any business without a structured HR department, and such risk is increased in FOBs because of the interplay and dynamics of the family and business sub-systems. Human resource management represents a critical component of any well-functioning business, but there is an absence of a structured approach to HR in many FOBs in the Caribbean. That is, HR is treated as an afterthought in many of these businesses and, in many cases, being relegated or assigned to the family member who is a ‘people person’. While having a ‘people person’ to lead the HR thrust of the business could be considered a necessary condition, it is certainly not a sufficient condition – being a ‘people person’ is not HR.

There are many definitions of HR. A summary from the myriad of definitions is that HR involves the planning and mobilising of a set of organisational activities with the objective of attracting, developing and maintaining an efficient and effective workforce. Therefore, the function or role of HR is more than being a ‘people person’, but covers the broad areas of capabilities and compliance.

A person who is employed to manage the HR of the family business has the responsibility of managing or coordinating activities such as recruiting and training of persons who can add value to the organisation, managing disputes and work-related conflicts and balancing the needs of both family and non-family members. In addition to being capable of covering the aforementioned areas, the HR personnel needs to be au fait with the regulations and policies that govern employment in a country or region.

What is the chance of a family member having the capacity to cover these and other critical components of a structured HR unit needed for a successful family business?

While there are benefits of having components of familiness – the so-called unique contribution that family involvement brings to a business, care must be taken not to extend this beyond what is logical or reasonable. There is the danger of introducing elements of familiness that are constrictive instead of being distinctive – there is more downside than upside from family involvement.

For example, having a family member in charge of HR can lead to role confusion, which can impede the adherence to policies and laws governing employment. There is also the difficulty of maintaining independence in resolving work conflicts and handling employment relations – there are cases where non-family members got the ‘bitter end of the stick’ in work conflicts with family members because of the manager of HR’s emotional ties to the family, combined with the absence of the requisite training to address such conflicts with any degree of independence.

Associated with the family sub-system is the support of family members for each other, through thick and thin. On the other hand, the business sub-system should be based on merit and adherence to the rules. But this is not always the case, because family members who are HR managers are confused and conflicted regarding when to wear the ‘business hat’ versus switching to the ‘family hat’, in situations such as hiring and firing, resolving conflicts, doing job evaluations and engaging in discussions on compensation packages.

These are not far-fetched theoretical issues; they are real problems confronting many FOBs in the Caribbean – referencing cases in Jamaica, Trinidad & Tobago, Barbados and Guyana.

It is no secret that I believe that the family represents the seat of entrepreneurship in the Caribbean and that FOBs represent an untapped ‘gold mine’ (real gold, not ‘fools’ gold) in Jamaica’s landscape.

However, the unearthing of this gold must be supported by good and proven business practices applied to FOBs. The long-term influence, success and sustainability of FOBs in the Caribbean will be enhanced with a structured, coordinated and strategic approach to HR, devoid of the imposition of unqualified family members in the mix. It’s an imperative, not an option.

More anon.

Lawrence Nicholson, PhD, is a senior lecturer at the Mona School of Business & Management, University of the West Indies, a director of the RJRGLEANER Communications Group and author of Understanding the Caribbean Enterprise: Insights from MSMEs and Family-Owned Businesses.

Email: lawrence.n.08@gmail.com