Hierarchy in Family Business – Advantages and Limitations

Just like individuals, businesses are not stand-alone entities but a reflection of the societies they function in. This is more so in family businesses in India that have both the family legacy and a deep social legacy to contend with.

One way in which societies can be classified is into societies that are hierarchical and that are egalitarian. This is usually interpreted as Eastern and Western societies. There are advantages and disadvantages in both.

While in hierarchical societies, one might suffer issues of primogeniture, male dominance, self-created idolizing, lack of transparency and openness, one would also benefit from the comfort of proven systems, security in order, respect and assured execution.

This is also linked to authority. A figure of authority in a family business, holds a family together but if there are too many such figures of authority, the business tends to get pulled in different directions and might implode sooner rather than later.

Also, hierarchy without meritocracy gives rise to several problems. For example, let us say there are five brothers who inherit the family business. By virtue of hierarchy, the eldest brother becomes the chairman. However, he is incompetent and does not command respect from the others. He is frustrated because he feels the pain of being redundant and therefore develops low self-esteem. The others are frustrated because they see him as an unworthy boss. The fault lines in the business get wider.

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