Strictly business?

Why do family and business often conflict?

Because inherently, these two entities have different roles and goals.  Each exists in society for fundamentally different reasons.

The family’s primary social function is to ensure the care and nurturing of its members, and relationships are thus meant to satisfy each other’s needs.

On the other hand, the basic aim of business is the generation of goods and services through organized behavior and performance, so relationships are guided by norms and rules that facilitate profit and business sustainability.

Traditionally, Western researchers assume that family and business should be kept separate. But because of the rise of Asian emerging economies, some researchers have realized the merit of certain Eastern notions and now question the validity of their own management principles.

Take, for example, the notion that business should remain “strictly business.”

One of the earliest US management professors to argue against this was R. Robinson, who in the 1960s was studying the meteoric rise of Japanese conglomerates.

In his 1964 book “International Business Policy,” Robinson wrote:  “Certain values long held at least in verbal awe in professional management circles may not be universally valid.  The concept of complete neutrality in interpersonal relations may not, after all, be conducive to the most effective communication with a large organization.”

In short, business cannot always remain strictly business.

As for the allegedly unprofessional nature of many Asian family businesses, certain ingenious methods, based on culture, have been developed to surmount possible problems.

Take the problem of accounting.  Professionals often deride traditional finance and accounting practices as “backward, done on scraps of paper, using a system only the founder understands.”  While there is some truth to this, the important thing is these traditional systems do work, serving the purpose of the family business.

Instead of professional standards (such as Generally Accepted Accounting Principles), traditional systems rely on family safeguards.

In his 1986 book “The Overseas Chinese in Asean,” Asian Institute of Management (AIM) professor Victor Limlingan made these observations about the overseas Chinese (including Tsinoy) accounting system: “The Chinese businessman has traditionally used the cash-flow system of accounting, in contrast to the double-entry [professional accounting] system.  Its simplicity has also meant an inadequate control system.”

“The solution,” he continues, “is to rely on social control (e.g., family ties) to augment the weak formal control system.”

In addition, Chinese firms have relied on their own social organizations (the Chinese Chamber of Commerce as credit bureau) and on their social customs (payment of debt during the Chinese New Year), and even on the modern commercial banking system (postdated checks) to facilitate their business operations.”

AIM professor Leonard Silos discussed the intertwining of bureaucracy (business) and clan (family) in his 1991 book “Oikos.”  The Greek word “oikos” means, first, house, household or family.

But “oikos” also connotes business.

“Oikos is the root word of the English term economy, drawing out the economic component of the house, a connection that surfaces whenever we call business establishments the ‘house’ of such and such a family, the house of Morgan, the house of Mitsui, and so on.  Oikonomia (economy), on the other hand, meant household management, and a oikonomos (economist) was a house administrator, a term also used generally for administrator or manager.  Oikos, then also conveys the idea of management.”

Drawing from sociology and economics, Silos attempts to delineate the distinctions between clan and bureaucracy, and to show that these two concepts, at first glance seemingly irreconcilable, can actually be integrated in the Asian context.

The particular mix of clan and bureaucratic cultures produces a flavor unique to Asian corporations, and Silos cited the case of the hugely successful Japanese firms, wherein these two notions work in tandem.

His conclusion? When Eastern and Western businesses are placed side by side, their values and principles work quite well in their own contexts.

Family and business need not be in conflict after all.

Next Friday:  Can money buy happiness?

Queena N. Lee-Chua is on the board of directors of Ateneo de Manila University’s Family Business Development Center.  Get her book “Successful Family Businesses” at the University Press (e-mail [email protected].)  E-mail the author at [email protected].