Differences Between Traditional and Corporate Businesses

When saying traditional family businesses, I mean the family businesses where most of the employees are relatives or are recommended by family members, and there is usually one owner or a limited partnership.Corporations, however,have a particular number of shareholders who have invested in the businesses’ stock, andall management activities are aligned with the corporations’values.

Work Culture

In a family business, the culture is determined by the values, influences, ethics, experiences and education of the family members who own and manage the business. There is a more informal approach; and in general, a patriarchal work culture is often prominent.

A corporation, on the other hand, adoptsa more formal cultural approach; and the organisational structure is usually de-centralised. The decision making power lies in the hands of a board of directors and the work culture in a corporation lacks the personal touch that is evident in a family business culture.

Values and Capabilities

In a family business,the owner subjectively sees the values and capabilities of the employees, and on that basis the employees are rewarded or “punished”. As such, the family members might be preferred for a promotion or a job position in the business over an ordinary employee. Nepotism can play a strong role.

Contrarily, the values and capabilities of the employees within a corporation are assessed and judged on merit. Hiring new employees and the promotion of others are made objectively and employees are judged on the basis of their worth and value tothe corporation. However, even in such a formal culture, nepotism can take place at the higher echelons of power.

Strategy

In a family business, the final decision in creating the company’s strategies lies in the hands of one or a few family members who run and manage the business. Mostly they have a longer time horizon. The first generation is setting the foundations of the company and some members of the second generation usually get a business and management education, so the family business can grow further, and adapt with new technology or changes indemand and supply.

In a corporation, strategies and decisions are collectively formed by the board of members, and while theultimate decision making power may be limited to a few individuals, they nevertheless need to placate their shareholders. This process is more decentralised, where managers and strategy policy-making employees have the liberty to voice their opinions.

Although often underestimated, family businesses are key players in the global economy. They begin by providing services, manufacturing or trade. The engagement and the interest of the employees for a greater family cause in the family business is one of the strongest aspectsthat can lead to success. Some of them became major global players in the industries, for example, SC Johnson, Bosch, C&A or Haniel, and Samsung. Each of them found adifferent way to ensure the survival and successful management of the company, whilestill being owned by larger family members.

In contrast, successful corporate companies such as Apple or Google engaged the employees in the corporate work; they showed that they care for their people, even when making and implementing the strategies for the prosperity of the company.


Bringing closer both ways of managing abusiness, with making the right decisions at the right time, can surely lead to global success — a family business when led professionally, and a corporate business when led with care for the employees and customers.

Sonja Vos Ralevska

Photo credits: Designed by Valeria_Aksakova / Freepik