The Successful Family Businessby Michelle Bomberger | March 1, 2016
Over the years, I’ve seen many families find joy and success in working together in a family business – and of course, some that have struggled to maintain balance between these two intertwined parts of their lives. So what’s the secret to success?
First and foremost, I would say a recognition of the fact that these two parts of life don’t naturally flow together. In looking at these different parts of our lives, we generally can keep them separate. It’s nice to be able to go home after work and discuss how things went that day including the people and issues you are dealing with. But when the people of the business are your family members, the typical outlets for sharing or venting do not exist. In these relationships, where husband and wife, in-laws, and children are working together, boundaries must be set so that the business is not the 24/7 conversation in the household. Similarly, boundaries are needed to ensure business and home lives are each kept to their own purview to minimize the chance that business disputes become family disputes.
From this, the second step successful family businesses have taken is to formalize a regular meeting schedule for discussing business issues and keep these discussions away from dedicated family time such as the dinner table and vacations. If a business issue must be discussed, it should be done as part of the business day. An expectation of respect and courtesy exists so that each person treats family members the way they would a manager or employee that is not a family member. We all understand that we sometimes treat those we love worse than those we don’t know well because we can get away with that behavior – they will forgive us. However, these successful businesses set a tone that family members are treated similarly to any other professional relationship in the company.
Next, I see these strong family businesses formalizing their business planning and relationships with one another. I can see how easy it would be to be less formal in a family business because it seems less risk exists of lawsuits, terminations, and other negative consequences. In reality, though, the stakes are higher. If you have a falling out with an employee in your business, you can go your separate ways. When it’s your mother-in-law or your son, it’s an entirely different scenario that permeates every part of your life. Formalizing how the family members fit into the business, the roles and responsibilities and expectations, and plans for the business’ future are essential to successfully growing the business and maintaining solid family relationships.
Depending on who is involved and their level of involvement, different tools are needed. If multiple family members are owners, Board members and employees of the company, each of those relationships should be formally documented along with the rules of engagement. A Shareholder Agreement should be in place to describe how shares are distributed and repurchased especially if the goal is to keep the business within the family. If a transition plan has been contemplated, it should be documented as well through the Shareholder Agreement, estate plans, or an internal succession planning document and discussed with the key players. Similarly, employment agreements are needed to set clear expectations of employment relationships in the company. In addition, simple tools such as a Code of Conduct can make a difference as to how family members are expected to engage with one another and hold one another accountable.
Based on what I’ve seen, the basics of success are open discussion, clear rules of engagement and formal documentation of plans and intentions. These tools are not new, though. All businesses need them, but the cross-over of business and personal relationships that is unique to a family business makes them essential to keeping the peace both at work and at home.