A Family Business is a unique business structure and we must find the delicate balance of combining the Family system and the Business system, while also keeping them separate enough to avoid conflict. To deal effectively with the sometimes conflicting interests of the Family and the Business, it is important to understand the relationship between Family values and Business values and how they differ.
The Different Dynamics
The Family involves emotional acceptance; the Business demands rationality and results. The two systems are shown below. This illustration may help to visualise the dynamics of the situation and understand how conflicts arise:
To the extent that the Family system and the Business system overlap, there is potential for conflict. The Family system seeks to preserve harmony and minimise change. In contrast the Business system sometimes requires conflict and transformation.
The Benefits from Family/Business integration
Although there is this potential for conflict it is important to keep in mind that some very important benefits can be derived from the integration of Family and Business. Many very successful Businesses can point to the trust, commitment, loyalty and common belief that comes from the Family dynamic as the most important contribution towards the growth and sustainability of their Business.
So, how do we get the best of both of both worlds and avoid the downside risk?
Communication is key
Communication is essential to maintaining long term harmony. In Family Businesses, lack of communication creates a knowledge vacuum.
Inevitably, people will fill this vacuum with their own assumptions that can often do more damage than the truth.
By creating formal communication forums, the interests of the stakeholders can be better understood. As Family Businesses grow, they become more complicated, with more people involved. By creating sound communication structures, decision making can become less onerous and more effective.
It is important to separate Family meetings from Business Meetings. The objective of a Family meeting is to bring the Family together to share goals and decisions, to discuss common problems, to learn more about the Business and to preserve the Family values and traditions. It also helps to delineate between the Family and the Business and will assist in planning for the future in an orderly and constructive way. It can help to avoid conflict by helping families address early on, and openly, issues that will inevitably arise. Do not use the meeting to make business or management decisions. The focus should be on the balance between the Business and the Family. Arranging Family meetings can require considerable effort; however, they can also yield major rewards that transcend the individual’s interests and strengthen the Family as a whole.
Regular ‘business only’ meetings are essential. Large companies utilise Board meetings as the forum for key decision making to bring objectivity, independence, strategic input and commitment to the Business. Business meetings can assist in clarifying the boundaries between Business and Family. Meetings should be well prepared with an agenda, background papers and minutes. It is recommended that these meetings take place at least quarterly and the meeting date should be “cast in stone”.
Business Values and the Mission Statement
An excellent way to successfully integrate Family and Business is to enshrine Family values into the Business Values and the Mission Statement. For example, some key objectives of the Business could be to protect work /life balance, maintain Family harmony, be open and honest with each other and work in close collaboration.
These values can identify the unique and distinctive characteristics that embody the spirit and personality of the organisation.
They do not have to be contrary to best Business practice and should not be taken as a ‘Family at all costs’ statement. Other elements of good governance will protect the Business from the lack of formality and structure that sometimes occurs in Family Businesses.
Decision making policy
In support of the communication structure there should be an agreed and documented Decision-Making Policy. Family members should understand what authority has been delegated and the type of decisions that require majority or unanimous approval.
With the right amount of formality, structure and good Business practice it is possible to derive the best that a Family Business can offer, without the downside. A successful Family Business allows us to celebrate a special ongoing legacy, often across generations. Unfortunately, if not handled properly, the Business dynamic can cause serious and sometimes irreparable damage to Family relationships.