There are many benefits to having a family run business - from in-depth knowledge to deep commitment and closeness between family members. Building that business to an enterprise level of success requires decisions to be made that may be risky, affect either or both the short-term and long-term vision of the company, may not have immediate return on investment, and all of the challenges that go along with that. Conflicts and misunderstandings are inevitable and may arise more often in situations that involve family members. As a result, unmet expectations, performance level, remuneration, tempers and ownership issues could be problematic and felt between these business owners.
To help facilitate and prevent ongoing issues, implementing mitigation processes from the get go will formulate and set a strong precedent to all. Here are some fundamental processes to put in place:
Establish a family council
Provide clarity and structure for family members and non-family employees
Creating formal governance procedures to deal with family in business is the most important step you can take to mitigate conflict. To start, establish a family council to deal with family issues and shareholders’ assemblies to deal with ownership issues. These councils help to divide the issues and sets boundaries between those activities. For clarity, family councils should be separate from the board of directors and management of the company. It is a forum that not only allows family owners to be engaged in the debate but all family members can participate regardless of whether they are actively involved.
In addition to establishing family protocols or constitution, the family can use these councils to address all issues, however large or small they might be. For example, If a family member needs to use the company vehicle for personal reasons, the family council is a great forum to assess the situation. In the case that the use of a vehicle is authorized, the family can collectively decide whether this privilege also extends to non-family employees of the business. It also provides an opportunity to ascribe an overarching protocol on the use of business resources for family members. There is a lot to be gained in terms of formal governance on family issues, but a family council is especially useful for singular events as well.
Being clear in expectations to all employees (family and non-family) will help mitigate or even prevent conflict altogether. Prioritize structure and communication and ask the important questions that may both be biased and unbiased by having an outside party involved at this stage. For example, are family members prioritized over non-family employees for promotions? Are there rivalries when it comes to business roles? Are there communications going out to family members but employees are excluded or vice versa? Are your best efforts put forth when trying to structure roles, responsibilities, and remuneration for all employees?
A clearly defined hierarchy is critical to have to smooth day-to-day operations. Create a clear organizational chart readily available to all employees to prevent confusion within the business.
There is a lot to be gained in terms of formal governance on family issues.
Your long-term strategic business plan should include a succession plan — where do you want to take the business in the long run and who do you want to lead this growth? If your succession plan involves the younger generation in your family, involve them early to instill a sense of responsibility and commitment to the business. This can begin with participation in the family council as they don’t necessarily having to be actively involved in the operation of the business.
Generational conflict can be an issue for long-term family businesses and cause arguments in how the business should be run and can affect the business’ overall strategic direction. For example, older generations may not understand the younger generation’s desire to increase resources for digital marketing. Younger generations may have less loyalty to pass products and long-held business traditions. Working together to understand everyone’s viewpoints by creating a succession and strategic plan based on meaningful discussion will help mitigate any family ordeal.
The best overall measure to mitigate family conflict in business and continue growing it successfully as a team is to treat the business as you would treat any other business. To prevent any future mishandlings, establish appropriate resolution committees and defer trusted non-family member decision makers to steer it, as they would offer an unbiased voice.
Skidmore is a family-owned business of over 30 years and have expert advice in this field. For consultation inquiries or investment opportunities to accelerate the growth of your family business, contact us here.