“From each according to his ability, to each according to his needs, “ is a slogan popularized by Karl Marx in his 1875 Critique of the Gotha Program.
Often when giving a presentation about the challenges of running a family business, I use this quote to highlight the differences between the economic system we use in our family and the one we use at work. If you are the main bread-winner for your family, it’s not reasonable for you to use all of the income you produce for your own wants or needs. Resources you bring in are allocated to family members based upon their needs. Parents typically determine what is a “need” versus a “want” and set up a priority system. Once the basics of food, water, shelter, clothing, transportation and communication are covered, the question of where to allocate resources is answered by finding the greatest need. As an example of this, consider the family with a member who becomes ill and needs urgent medical care. A family will sacrifice almost everything to ensure the well-being of the one member. Once the member is brought back to health, however, the priority system and allocation of resources will change to fit the needs of the family as judged by parents. It’s a system that we are all used to and that feels natural and right. And it is socialistic by nature.
I’ll state the obvious: it’s important to make a hard break between our family and our family business. If a member of the next generation of a family business arrives at the workplace with an attitude akin to “Congratulations all who are here employed, I have arrived! Me of Royal Blood! Bow down and worship the future heir and bring gifts and resources to lay at my feet” we create problems for employees, family members and ourselves. At the family business, we must operate as capitalists, allocating resources based on forecasted return on investment and fit with strategic goals and culture. Employees who don’t perform according to expectations lose jobs or get demoted, regardless of relationship to the owners or managers. Those who do perform get promotions, accolades, corner offices, bonuses, perks, more responsibility and prestige.
So how can we successfully make the transition between home and office in a family business? How can we make sure that the Next Generation understands how important it is that the business can succeed only if it is managed by principles of merit and competition and performance? Much of the answer is found in creating a set of shared expectations and understandings with family members, employees and owners to define which behaviors and attitudes are acceptable and which are not in the scheme of the family business system. What does this mean on a workable, practical level? Tune in later this week for a specific example or two of family rules and policies that can provide immediate help in keeping family socialism at home and capitalism at work.