What it Takes for a Successful Family Business to Be Viable

by David Bork

Recently I was presented with the opportunity to write, what it takes to be a successful family business. What follows is a “slightly“ expanded version of that one page effort.

Alignment

Owners discuss all critical issues so that it is certain that they are in agreement, in alignment on important matters. This does not mean that family members cannot have differences but it does mean when they exist, the parties openly agree to disagree. This applies to direction of the company, employment of family members, use of resources, quality of product or service.

https://www.familybusinessmatters.consulting/wp-content/uploads/2017/08/tenkeys.pdf

Vision

There is a shared vision for your company and what it will become over time. That 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, preferably all of the owners. This makes it possible to manage against this vision as well as hold executives accountable and responsible for the outcomes.

Action Plan

The vision must be translated into a detailed Action Plan, one that has a timetable for actions to be taken, persons assigned responsibility for the outcomes and then held accountable for bringing them into fruition. Structure and job descriptions are often part of
this process.

Family Constitution

This is a written document that incorporates the spoken and implicit family messages. It reflects the commitment of owners to their values. Often it will delineate the family expectations for the relationships among and between family members. Incorporation of these family messages into a binding document proves to be a great benefit for many
families. It removes ambiguity from the system.

https://www.familybusinessmatters.consulting/wp-content/uploads/2017/05/wethepeople.pdf

Shareholder Agreement

Creation of a binding legal agreement is essential. This defines how parties will do business together. Inclusion of agreement to mediate any disputes is important, as is binding arbitration if mediation is not successful. It is almost axiomatic that when there is an agreement for binding arbitration, that process does not get used because individuals would rather make the final decision for themselves.

https://www.familybusinessmatters.consulting/wp-content/uploads/2017/05/sampleshareholder.pdf

A Seat at the Table

What skills must successors have, if and when they are to have a seat at the table? The underlying issue is competence and what behaviors are 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, grounded in factual data and not just persons who have opinions.

Entry/Exit to/from Employment in the Family Owned Company

What are the terms and conditions of employment in the family owned enterprise? Please see “If Family Members Ask for a Job,” see link below. It is 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.

https://www.familybusinessmatters.consulting/wp-content/uploads/2017/08/familybusiness.pdf

The Past

There is hardly a family that does not have some stories of problems that occurred in the past. Often these stories get in the way of good relationships. These must be addressed and resolved so they do not intrude into the day-to-day operation of the business nor the
decision-making at the leadership/Board level. In the “Lion King,” the witch doctor bops the prince on the head with a stick. His reaction, “Hey, you hit me!” She replied, “Forget about it; its in the past. Families benefit from once and for all time, 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.

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.

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For more information on how Family Business Matters can help your family business survive and thrive, please contact us today at (970) 948-5077.