Want a concise rundown of what it takes to be a successful family business?Â As a family business consultant and speaker who helps to create solutions for the unique challenges faced by family business, Iâ€™ve created a quick list of items that are necessary for success.
Owners should discuss all critical issues so that it is certain that they are in agreement on important matters. This does not mean that family members cannot have differences. It means that when differences exist, the parties openly agree to disagree. This applies to direction of the company, employment of family members, use of resources, quality of products or services, etc.
There should be a shared vision for the company and what it will become over time. This includes its purpose for being, which is likely to reflect the values of the owners. Family companies are best served when there is a written vision statement that is agreed upon by the majority, and preferably all, of the owners. This makes it possible to manage the business according to this vision and to hold executives accountable for the outcomes.
The vision must be translated into a detailed Action Plan. This plan should have a timetable for actions to be taken and should assign responsibility for outcomes. Structure and job descriptions are often part of this process.
Family constitutions are instruments of governance. They define rights and obligations and provide criteria and procedures for making important decisions. They set up the playing field for orderly succession and establish mechanisms to help resolve conflicts before they have damaging effects on the business and on family relationships. Read more about family constitutions here.
Creation of a binding legal agreement that defines how parties will do business together is essential. Inclusion of agreement to mediate any disputes is important, as is binding arbitration if mediation is not successful. Nearly always when there is an agreement for binding arbitration, that process does not get used because individuals would rather make the final decision for themselves. Read more about shareholder agreements here.
A Seat at the Table
What skills must successors have, if and when they are to have a â€œseat at the tableâ€? The underlying issue is competence and those behaviors evidenced by a responsible owner. Keep in mind that the knowledge and skills of an owner are different from the qualifications necessary for employment. It is best when those at the table are well informed and grounded in factual data, and not just persons who have opinions.
Entry to/Exit from Employment in the Business
What are the terms and conditions of employment in the family-owned enterprise? These should be defined in an official employment policy. This link takes you to an example of an employment policy developed years ago that has become the “gold standard” in the industry for such matters. It may be more stringent than most families require but it is a good place to start the discussion.
There is hardly a family that does not have stories of problems that occurred in the past. Often these problems get in the way of good relationships.Â These issues must be resolved so they do not intrude on the day-to-day operation of the business, nor the decision-making at the leadership level. Families benefit from once and for all putting events, hurts, oversights and other matters that breed resentment, into the past. If one fails to do so, the resentment festers and finally surfaces at some critical moment when it does harm to everyone.
There you have it, family business success on one page!
Read about The Ten Keys to Success in Family Business here.
Does Your Family Business Need Help?
Family Business Matters has extensive experience assisting family businesses. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Family Business Matters has assisted more than 450 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.
For more information on how Family Business Matters can help your family business survive and thrive, please contact us today at (970) 948-5077.