Terrie's Job Tips -- Married Couples at Work - Part Three: The Family Business

Most successful businesses start out with a pioneering person with an idea along with the tenacity and will power needed to build it into a viable business. With the following generation of work, it is highly likely that on occasion things will become difficult, and the business founder may need to bring in a family member or two as a means to reduce costs or gain control over a specific function (i.e., the accounting). Doing this can be tricky, since it upsets the power balance between owners and senior management, but since it is usually free labor and the business founder can focus on sales knowing that someone they trust is minding the fort, means that short periods of spousal assistance can indeed rescue a floundering firm.

Then, later in the company's lifecycle, that same business owner will be thinking about succession planning and wanting to bring in a son or daughter so as to pass on a family inheritance without having to worry about tax. By this I mean that selling a company privately attracts significant lump sum income tax, whereas continuing the business simply results in the usual monthly income tax. Especially for private (non-listed) companies, inheritance by a son or son-in-law is a time-honored practice. Historically if a merchant family had no sons, they would adopt someone in to help take over the business.

Given this history of inheritance, many of Japan's 1.5m registered companies are still being run by the founder or their immediate family. Since the company is typically the primary source of income for the family, naturally they want to ensure continuity and control. This means very slow, long term (indeed, generational) development of the business and lack of opportunity for non-familial senior management to hold stocks or to have control of the board of directors. It takes a certain type of manager to accept that they will never be in charge, no matter how hard they work. The main rewards for such people are a regular and growing income, seniority and respect from others taking the same career path, and of course job security.

From what I've seen over the years, in well disciplined old-money families the kids are educated from the get-go to prepare to take over their inheritance and run it with a sense of responsibility. New-money kids on the other hand have typically been raised in a family where the father's ambitions have prevented him from being part of the child's upbringing, and this has left a vacuum where there is no code of honor or expectations of the child. Thus, such kids either want nothing to do with their Dad's business - a growing problem for Japan's aging generation of founding presidents, or they come into the business with all sorts of emotional and intellectual baggage. These kids can be unreasonable, insecure, insensitive, and incapable of developing meaningful personal relationships. Or sometimes much worse...

Such heirs can really mess up a company quickly through inexperience and grandiose business plans. Over the years I've seen a number of cases of this, and usually the ones that have eventually turned out well have been where the old man was still close to the business and was able to step on and curb the excesses. As a case in point, I watched one young 2nd generation CEO burn through JPY10bn of family money in various investments, few of which turned out because the company wasn't able to combine them into the existing business structure. In the end, his Dad stepped in and put a stop to it.

As an employee, apart from the friction in relationships, the worst that can happen in a closely run family firm is that you hit a glass ceiling at a certain stage in your career development. You will find that either family or retainers of the family occupy all the more senior positions above you. For those already in this situation, just remember that blood is thicker than water and you may as well start planning your transfer to a new job.

If on the other hand you're just getting started in your career, the great thing about family-run companies is that making the right connections and right impressions can really accelerate your career. I have seen a number of talented bilingual foreigners being picked up by a young president for the purpose of business expansion overseas. While such expansions may or may not be successful, it is certainly a great way for you to build your own business experience and work in areas that you might not otherwise had had the chance to do - finding investment opportunities, negotiating major deals, fixing problems in foreign subsidiaries, etc.