Why Family Firms Need HR to Become Institutions

What happens when the founders of a family business transfer leadership, and the once informal, close-knit management suddenly must function like a professionally managed organisation?

This is more than just a procedural change for family businesses—it means building a company that operates smoothly without the family-owners exercising unrestricted control over the firm.

In this process, one of the major shifts they go through is ‘institutionalisation’, the stage where the organisation matures and develops a distinct identity. As this transformation happens, founders of the family business gradually lose their ability to directly influence organisational outcomes.

But who is responsible for making this shift effective, efficient and smooth during this critical transition? The HR leaders.