Key organisational health building blocks for family business success

Family-owned businesses have for a long time played a bigger role in the global economy, perhaps more than is appreciated. For example, it is estimated that family-owned businesses today account for more than 70 per cent of the gross domestic product (GDP) globally, and over 60 per cent of global employment.

It can therefore be concluded that family businesses are the predominant type of business organisation in every economy in the world, as they play a significant role in creating employment in the private sector, while boosting gross domestic product.

Some of the well-known international companies today that have had family business beginnings include Walmart (started in 1962), Nike (started in 1964), Ford Motor company (started in 1903), Samsung (started in 1938), Tata Group (started in 1868), Bosch (started in 1886), Johnson & Johnson (started in 1886) and KFC (started in 1930).

The Ford family, to date, still holds a stake in the Ford Motor Company and maintains influence through special voting shares.

The Lee family continues to control Samsung, with key family members holding leadership positions. The Tata family retains strong ties in the Tata Group, with family trusts owning a significant portion of Tata Sons.

The Bosch family has a restructured stake in the business and retains a small share and influence through foundations. The Walton family still owns a significant portion of Walmart and remains deeply involved in its operations. As significant as family businesses seem to be, it sounds ironic that this subject matter is still in its infancy as an academic discipline.

Further, there is a significant challenge within the academic and business communities due to the absence of a standardised and agreed-upon definition of what precisely constitutes a family business.

The size, industry, culture and level of family involvement all contribute to the uniqueness of each family business. Some of the family business definitions that have been advanced include: When members of one family own enough voting equity to control strategy, policy and tactical implementation, when ownership control is by a single family or individual, when legal control over the business is by family members, when two or more family members influence the direction of the business through the exercise of management roles, kinship ties or ownership rights.

Defining what a family business is, therefore, surprisingly complex.

An improved understanding of how family businesses operate was given an academic boost by Harvard Business School Prof Renato Tagiuri and his then doctoral student-John Davis, in 1978. The two scholars designed a three overlapping circle model: “Family”, “Ownership” and “Business” - ‘Family’, representing family members, their relationships and their values; ‘Ownership’, in reference to the stakeholders who own the business, whether they are family members or external investors; ‘Business’, representing the operational aspects of the enterprise, including its management, employees and performance.

This model quickly became and continues to be the pivotal organising framework in attempting to understand family business systems, used by families, consultants and academics globally. Organisational health refers to the ability of an enterprise to align around a clear vision, to execute both effectively and efficiently, as it achieves its goals, thrives in its environment, and renews itself.

It calls for a combination of factors that include leadership, culture, employee well-being, and clear communication, which all contribute to a positive and productive work environment.  

According to a KPMG Global Family business report (2025), long-term value creation within a family business requires careful consideration of the business’s financial performance, sustainability, capacity and capability to engender growth.

Key organisational health indicators for family businesses according to the report include: effective diversification and risk management practices; clear governance frameworks that assist long term strategic planning; a focus on business continuity underpinned by a carefully thought through succession planning; an alignment of the business and family values; the embracing of innovation practices, a willingness to invest in new ideas and markets and finally a strong community engagement to enhance the business and the family’s reputation.

Based on the key seminal business model by Tagiuri and Davis, family businesses require a unique approach to organisational health, balancing family dynamics with business sustainability. The three key dimensions to consider are: ‘Family relationships’- healthy intra-family relationships are crucial. Regular family meetings with clear agendas help maintain open communication and prevent misunderstandings.

Business governance - clarity in policies for family and non-family employees fosters trust. Having non-family members on the board is considered best practice to ensure balanced decision-making.

‘Ownership agreements’- a strong shareholder agreement defines expectations and mitigates conflicts related to changes in ownership due to marriage, divorce, sudden death of a key family member or succession.

Organisational health is both a strength and a vulnerability for family businesses. When well-managed, the strong values of family trust and long-term focus of family firms do create a resilient and adaptive organisation.

But when neglected, these same characteristics can foster deep dysfunction and unending conflicts. The key to success for family businesses lies in balancing tradition with professionalism and emotions with structure.

-The writer is an expert in leadership