Labor Problems and Solutions

in Family Businesses
Introduction:

The place of the family business in the world economy is certainly

important. For example, 70% of Italian companies, 83% of French
companies, 90% of German companies and 75% of British
companies are family owned. In Western Europe, 65% of GDP is due
to family owned businesses, and two out of three companies in the
world are known to be family-owned (Gazioğlu & Oralhan, 2021).
A family business is a structure made up of one or more family members,
with other family members participating actively or outside the structure.
These are economic and social institutions in which the concept of
property rights is important and which pursue the policy of maintaining
unity and solidarity to avoid the collapse of the existing heritage. It is
inevitable to see the family work, the impact of work on the family, and a
reflection of unique family culture and traditions in corporate life.
What is a Family Business?

• Defined as mixed businesses that have a permeable and fragile border, integrating
all the emotions from family and financial interests. The family business has a
balancing structure, for those in family management, that manages emotions in
order to have more control over finances (Rouvinez & Ward, 2005).

• Is a commercial company in which many generations of a family, linked by blood,

marriage, or adoption, have both the power to influence the business vision and the
willingness to use that ability to pursue separate goals, influence decision-making.
 Features of a Family Business
• They are owned and controlled by members of a family,
• They are managed by family members,
• They are passed on from one generation to the next in
the family.
Advantages of Family Business
• Capital Structure Financing
• Decision-making
• Team Spirit Synergy
• Strong Family Ties
• Knowledge and Job Adaptability
• Corporate Culture
• Flexibility Ability
• Social Environment
• Stabilization in management policies
Disadvantages of Family Business
• Lacking of Financing
• Incorrect Employment Policy
• Uncertainty of Authority and Responsibilities
• Management Style
• Lack of Education Policy
• Family Culture
• Conflicts of Interest
Labor Problems in Family Business
• Not giving enough importance to human resources;
• Inadequate or non-compliance with the organizational chart,
authorization, responsibilities and job descriptions, and system
infrastructure (such as procedures, regulations, work and document
flow);
• High turnover, lack of attention to training and development activities;
• Emphasis on blood ties rather than talent and performance in the
company; priority recruitment of family members and relatives,
regardless of their abilities and experience;
• Creation of relative positions within the company; rapid raising of
relatives;
• Providing lifetime employment opportunities without performance
evaluations of relatives;
• Problems encountered when not investing in human resources and
moving away from institutionalization;
• Lack of motivation and workforce inefficiency;
• Problems experienced in the overall performance of the company;
• Growth stagnation or shrinkage or greater costs;
• Wrong/incomplete decisions taken by the top management,
• Increasing damage to the image and prestige in the sector,
• A value issue for the workforce is loyalty. They will own the workplace if
they are sure that the employee will spend his whole working life in that
business by knowing responsibility and benefiting the business. Thus, the
loyalty of employees in family businesses increases (İnan, 2021).
• Today, it is known that one of the most important problems that reduces
the performance of employees is the anxiety of being fired. For the
internal dynamics of the company, the relationship of the employees with
the family is very beneficial. Since employees have a sense of confidence
in this regard, they can show high performance by focusing on their work.
• In uninstitutionalized or unprofessional family businesses, qualified
people avoid working in family businesses. Because family members
intervene in all processes. This leads to the inability to employ personnel
with the necessary qualifications.
THE PROBLEM OF
NEPOTISM IN FAMILY
BUSINESS
NEPOTISM
• is when a person is assigned to or promoted in the business based only
on kinship relations, without considering his qualifications such as
education level, talent and success.
• Nepotism is a form of favoritism which is granted to relatives and
friends in various fields, including business, politics, entertainment,
sports, fitness, religion, and other activities.
 The primary reason for nepotism is a lack of trust in
family businesses for non-family members. In order to
minimize the effect of nepotism in family companies, it is
essential that the company realizes a cultural change that
reveals institutionalization instead of nepotistic approaches.
If family values are considered to be more important than
the values that the workplace should have, there may be a
danger that the future management will fall into the hands of
family members who are not competent in terms of business.
Solutions of Labor Problems in Family
Businesses

1.) PROFESSIONALIZATION OF FAMILY BUSINESS

Family businesses that cannot become professional cannot
survive. They need to be professionalized in an absolute sense.
This is a must. Whether it is a family business or not, a balanced
dialogue established with the employee not only ensures that the
tasks are carried out comfortably and in line with the objectives,
but also causes the employee to be motivated by feeling close to
the business and the family (Hougaz, 2015; Handler, 1994).
The most important problems preventing the organization of family
businesses are:
• Lack of job descriptions,
• No written constitution of its own,
• Lack of organizational culture,
• Privileges given to family members in the distribution of awards
(nepotism),
• Disagreement between family business owners and employees,
• Everyone doing the same work due to low specialization,
• Privileges given to family members in business decisions,
• Conflict between the role of the person in the family and the role of the
family business,
• Conflict between family members.
2.) REMOVING NEPOTISM
By taking some measures in family businesses, the effects of
nepotism can be reduced or completely eliminated. In this context,
family business owners should be aware of the objectionable
aspects of nepotism, display an open and transparent management
and avoid nepotism practices as much as possible. If the institution
considers itself as inadequate in this regard, it can benefit from
professional consultancy institutions (Bakan & Yılmaz,
2021).
3.) EFFECTIVE HUMAN RESOURCES
MANAGEMENT PRAACTICES
A company’s leaders must recognize that human
resources are an organization’s most important asset. If a
company is to be successful, its resources must be managed
effectively. A company’s success refers to the ability of its
personnel to implement its policies and procedures, which
are closely linked to the achievement of the company’s goals
and strategic plans. Therefore, it is the responsibility of the
human resources department to find, secure, direct and
develop employees whose skills and ambitions are consistent
with the company’s needs and goals (Tüzüner, 2021; Steward
CONCLUSION
Family businesses, as the main dynamic of commercial
life, have a great socio- economic importance for every
country due to their contribution to employment,
economy and therefore social life. A family business is
an economic union formed by people with the same
surname or blood ties in terms of kinship; they are
organizations established by people with kinship ties for
the purpose of producing goods/services and aiming for
profit.