Family businesses aren’t just businesses that happen to be owned and/or managed by a family. Factors like a long-term perspective, and the multiple/overlapping roles of owners, employees and family members are both strengths and weaknesses. These factors mean that family businesses need another set of principles to help them stay strong.
Because many stakeholders have multiple hats, separation of powers is very important. Everyone needs to understand what their roles are (employee, manager, owner, etc) and the scope of each role.
Because family business transitions fail most often because of poor communication, a governance structure that includes independent director(s) is essential for mature family businesses. This helps the business and family stay true to its values, put policies in place to manage conflict, and maintain open communication and accountability. Good governance ensures that issues are dealt with in the appropriate forum at all times.
Another reason for failure is lack of strategic renewal. External voices on a board can ensure regular strategic planning happens, established ideas are challenged, and all stakeholders’ voices are heard.
Consider This: Does your family operating business have a board? Does your family have a council (or similar), separate from the governance of any operating businesses? At family meetings, who is the chair? Does everyone who attends genuinely have a voice?
Original articles: https://www.forbes.com/sites/forbescoachescouncil/2020/01/17/15-tips-for-navigating-family-business-challenges/#462bab2b8a92, https://www.smartcompany.com.au/business-advice/family-business-constitution/, https://hbr.org/2020/01/managing-the-trickiest-parts-of-a-family-businesses, https://hbr.org/2020/01/every-family-business-needs-an-independent-director, https://hbr.org/2020/02/should-your-family-business-have-a-no-in-laws-policy, https://hbr.org/2020/02/what-makes-a-family-business-last, https://www.forbes.com/sites/rochellemclarke/2020/02/29/6-tips-for-working-with-family-and-friends/#4de7af5612f9
[Reposted with permission]
Actionable Generational Wealth Succession
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