RAPAPORT... Family plays an important role in the world of business. According to Peter Leach in his book Guide to the Family Business, it is estimated that as much as 80 percent of commercial enterprises are family controlled. This most definitely holds true for the diamond and jewelry industry, a community whose more established enterprises are, many times, family owned and managed. While our trade consists of unique and diverse ethnic groups, each with their own beliefs and traditions, family-related issues are a universal theme.
As the world around us changes, many family-run organizations, whatever their place in the diamond supply chain — mining, wholesale or retail — will need to take a good look at their current business models. The economic factors influencing today’s marketplace can challenge the manner in which family-run enterprises are managed, and both the positive and negative aspects will need to be evaluated.
Trust is a big factor in the dynamics of family businesses. Many Indian manufacturers and wholesalers send family members abroad to maintain and expand upon their existing operations. Diamond dealers in New York City traditionally incorporate family members to ensure there is accountability for all sales and purchases. Retailers will usually opt to utilize family members in operations before incurring unnecessary “out of pocket” expenditures by hiring additional personnel.
Ownership offers a form of incentive that many times enables family businesses to outperform their corporate peers. Given his or her vested interest, a participating family member’s drive to succeed and desire to perform can often exceed that of an associate interested in climbing the corporate ladder.
The opposite may occur as well, however, where undeserving or underperforming individuals, holding positions because of their family name, lack the same motivation to succeed as those without family backing. The complexities of a working environment comprising multiple family members also can outweigh the benefits involved. Feuds and ulterior motives may undermine the economic success of a family business in a relatively short period of time. Maintaining good working relations both among family members and with other associates is crucial to sustaining business.
I firmly believe that there is a need to integrate professionals and make the most of outside resources. While hiring top executives at enormous fees will not guarantee success, there is much benefit that can be realized from individuals possessing the specific experience and skill-set needed to accomplish certain goals. They can also supply a much-needed fresh perspective.
Structure and delegation are other crucial components of a successful family enterprise. A clear understanding of the positions that associates maintain and their responsibilities is vital for family and nonfamily members alike. Many family-run companies lack the structure needed to achieve great success. Growth may occur, but a lack of structure will limit the potential that can be realized. Delegation involves enabling others to perform. While the older generation is often reluctant to release control entirely, it is necessary for sustainable, long-term growth.
Today’s business environment is about people. A company’s most valuable assets truly are the minds, abilities and experiences of those it incorporates into its strategic thinking and operations. Family members can prove to be an enormous asset or a constant liability. Associates and employees looking forward to a better future and a constant, reliable source of income should not be disregarded, as they are an integral part of any company structure. Most importantly, family enterprises must be able to combat the negative aspects and build upon the benefits that a family-run business affords. There is as much threat as opportunity in such an environment, with only a thin line differentiating the two.
Article from the Rapaport Magazine - October 2008. To subscribe click here.