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The important role of family companies in the economy, their structure and legal frame work, their culture, the difficulties they face … all these related important issues come up every now and then.

An important question has been raised to me by some interested groups and some of the executives in companies classified as family companies. The question is related to the organizational and disciplinary structure of family companies. Are they needed? Are there any guidelines or examples to be followed and implemented?

To begin with, we flatly say for the success of any organization, particularly business organizations, the organizational structure and the availability of discipline is a necessity and should be maintained all through the span period of the entity. Needless to say, that failure to accommodate or observe this issue could lead to unexpected results and or failures.

It has been easily noticed, in many cases that there is linkage or mixture between the blood or brotherhood relationship and the business relationship. The big boss brother at home wants, also, to be the big boss brother at work. The son is the son and the daughter is the daughter…. This set of minds, could end up in many difficulties or obstacles for the welfare and future of the business. There should always be a room, if we could say, for two hats one for the business and the second for other relationships and kinships.

Maintaining organizational discipline in a family business can be extremely challenging because the family relationships can distort business roles and objectives.

Which hat to wear could be difficult to follow or to remember by some of the family members. This requires a non-individualistic approach, or in other words a policy stand or organizational structure to be adopted by the company and to be strictly followed by all concerned.

The family members, to safeguard their interests, are required to follow certain discipline in relation to the business. Sometimes it could be very hard to reprimand a relative or senior member in the family. However, the situation could be different in case there is certain policy procedure or established regulation to be followed under all circumstances.

The senior members are supposed to lead and give a good example to all family members under all occasions during good days or difficult days. There are many good examples and also there are many bad examples and both ways got their direct impact on the business and future role of the company.

In the same line, many concerned asked or raised the issue of, for example, how to reprimand a member of the family or a relative?

Basically, and as a matter of principle, we say that, such an issue will not be raised if there is organizational discipline structure in place and, also, if there is standard Policy. However, we recommend some points as, putting everything in writing, this to include, among other things, procedures, rules, guidelines, directives, all this should be in writing. Job description for everyone, clear duties, responsibilities, delegations…. should be in writing and known by everyone.

Procedures and written guidelines will minimize, to a great extent, internal conflicts between the concerned members. If a family member in the company consistently performs below expectations for any reason whatsoever, the person in charge shall call him and inform him about his performance according to the rules and procedures of the company. Direct contact is very essential in such circumstances and will give fruitful results and sets example to all family members.

Transparency with reference to procedures and rules should be maintained all through. All family members should be informed about performance expectations, possibility of improvements, if any, and a time table for performing them. Transparency requires open policy and processes. This could lead us to say that any actions taken behind closed doors will be viewed with suspicion and unacceptability by other members of the family.

A clear firm stand regarding the compliance of the rules and regular updating of procedures is highly required and should be maintained under all circumstances. Equal treatment in all cases, of compliance or non-compliance, is required.

Another point, that is to say fair treatment should also be followed with other non-family members who should feel justice, fair and non-discriminatory treatment with other family members. Non –family members could be the backbone of the company and discrimination between them and family members could jeopardize the interests of the company. Fairness and clear-cut policies will lead to successful healthy environment in all businesses.

Source: Dr. AbdelGadir Warsama / LEGAL COUNSEL – BAHRAIN