“TO set aside one’s prejudices, one’s present needs, and one’s own self interest in making a decision as a director for a company is an intellectual exercise that takes constant practice. In short, intellectual honesty is a journey and not a destination.” – Mervyn King
At the heart of a family business is family relationships. Family relationships may not appear to be critical to the success of family business until succession time – or when there is a crisis due to family bickering, backbiting or outright conflict. The threat or conflict is increased when multiple family members are involved.
The family’s emotional stability is the element of succession planning that can’t be planned for. For all the paperwork covering who gets what shares and at what price, and who becomes president, the family part gets everyone stuck. Fathers choose favorites. Siblings remember rivalries. Sisters get infuriated that they’re being passed over for their brothers, brothers get riled up that daddy’s girl is being anointed, parents refuse to retire.
Don Schwerzler, a family business expert based in Lawrenceville, Georgia says that every family business is unique and complex in its own way, so boiler plate solutions don’t always work. What may not work with the Gokongweis may work for you. There are some common rules of engagement for handling employees who are related by blood or marriage.
Don’t confuse family and business decisions like when you allow family members to borrow company vehicles for weekend family trips or permit them to use the services of the IT employee to set up their home offices. Don’t pass off personal expenses as business expenditures. “These are examples of meeting family needs with business resources,” says Jane Hilburt-Davis, president of Cambridge-based Key Resources and co-author of Consulting to Family Businesses. Don’t create two classes of employees—family vs. non-family. Special favors given to family members and friends de-motivate employees and set a bad example.
Don’t put family members on the payroll if they’re not working in the company or can’t make a real contribution to the business. In a start-up or family business, everybody does everything. Make sure that everyone has roles and responsibilities that are spelled out and are very clear. Establish each person’s title, job function, and compensation. Conduct performance reviews for family and non-family employees alike, adds Hilburt-Davis. Think twice about offering a contract to a supplier who is a relative. Award contracts based on merit.
Use family councils to address family matters. Some family members will share the same values but not the same vision. One sibling may want to grow the business and keep it privately owned while another sibling may want to sell it or take it public.
A family council comprises members who may be owners but not company employees. They meet monthly, quarterly and/or annually for the strategic planning of the business over the next year to next 10 years. The council does not micro manage the business but addresses family issues or concerns relative to the business. If a family member is working in the business buts needs a car this is something that the family council will address. Or if a family member needs to borrow money, the council will decide if it wants to create a fund for the purpose of granting family loans. It’s not uncommon for family members to sacrifice income or take a pay cut to keep the business afloat during tough times. Again the council would examine how best to compensate these family members going forward.
Seek out a mediator or consultant—family business therapists much like a marriage counselor—to help deal with family feuds, clashes about business strategy, and decisions about succession. By understanding the family dynamics, this person can act as a negotiator and devise productive resolutions.
Establish healthy boundaries between family and business. This especially applies to co-preneuers (husband-and-wife teams). Running a business together with your spouse is a balancing act. Agree and adhere to some kind of system. For example, some couples refuse to drive to or from work together. Others won’t talk about the business after 6 pm, at home on weekends, or during family vacations. Try to get away from the business quite a bit, advises Wayne Rivers, president of The Family Business Institute in Raleigh, North Carolina. “Turn off the cell phone, leave the laptop at home, and go to the island for ten days,” he says. “If you don’t tend to the relationship outside of the business, you won’t have a relationship.”
In an increasingly complex marketplace, businesses have complex needs, and administering to them can take a lot of time and energy. But families have needs too, resulting in inevitable conflicts of interest. It’s important that you develop your strategies and organize your day to day life so as to minimize these conflicts. After all, it’s in your interest to keep both your business and your family doing well and to work to help them complement rather than undermine each other.
