This chapter focuses on why family-owned businesses are different. Because the business owners, and managers, are all related family members, family dynamics always impact operating the business. The chapter details the use of two-circle family business analysis, focusing on ownership and family membership, and the three-circle model that focuses on ownership, family membership and also employment (participation). Use of these models can help an adviser predict conflicts in family businesses. Conflicts arise among individuals who work in the business and those who do not. The chapter also explores the differences between “family systems” – which value and reward individuals based on family membership, and “business systems” – that focus on effectiveness, efficiency and merit. In a family business a person’s last name often carries more weight than skills and ability when it comes to compensation and advancement. Finally, the chapter discusses the pros and cons of intervention to solve serious problems.
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