Managing the relationships between your business and your family is key to developing an effective succession plan.
Most people have the luxury of leaving their work at the office and are able to keep their private lives somewhat separate from their jobs.
When you work with your family members, however, those two worlds will inevitably overlap. Learning to successfully manage that overlap is the only way for the family and business to co-exist in harmony.
In his book, “Your Guide to Business Growth and Succession Planning,” family business expert Mike Henning devotes several chapters to explaining how best to do that. Henning discusses the “family system” and “business system,” the “values” that drive each one, and how they are often at odds.
For example, one very common family value is a resistance to change. After a major event such as a birth or death, families put a lot of work into restoring their lives, as much as possible, to the way they were before. It’s the same with holiday traditions. No matter how much extra work or conflict it causes, family members will bend over backwards to keep doing things the way they’ve always done them.
Avoiding confrontation is another common value many families share. Or, they take the opposite approach, constantly bickering with one another while the underlying issues are never addressed or resolved.
Now contrast those with “business values,” where change is necessary to continually adapt to market conditions and problems must be dealt with and solved in a timely and productive manner.
“The values that drive families so well don’t work in a business setting – and vice versa,” Henning writes. “They are the ultimate oxymoron.”
In his experience, finding a balanced approach that manages the overlapping relationship between the business and the family is best for the long-term interests of both. There are a number of steps that can be taken to do this. One of the most important is to establish policies that govern which family members work in the business.
Henning calls this the “Family Participation Policy” and says it should include rules for potential employees as well as the present employees/owners. Those rules may include things such as who is eligible to work in the business, the qualifications they will need to be hired, and who can have an ownership stake.
Rules for compensation, obviously, also play a vital role. Henning believes that it is often the message that plays a greater part in this than the money itself. He advises clients to base a salary or wage for a job on its market value. But, no matter the dollars that are paid out, it’s important to make sure the method and reasoning is clearly defined and communicated to family members.
It’s also important that well-defined boundaries be established between the family and the business. Henning says the boundary issues most crucial to any family business are behavior, identity, in-law and time.
The behavior boundary relates to the roles members play within the family and how those translate to the business. A father who uses a “my way or the highway” approach to family decisions needs to realize that won’t translate in a healthy way to the family business.
Having an effective identity boundary can help with that. Using the previous example, if that father and his son have a problem at the business and the father tackles the problem as a dad, while the son tackles the problem as an employee, finding a solution may be more difficult. Knowing when to wear the family hat or the business hat is important.
The in-law boundary involves how someone from outside the family/business is incorporated into it. Will the in-law have an opportunity to work in the business, will he or she have access to all of the company’s information, be invited to all the meetings, allowed to own stock, etc.
And, finally, the time boundary is necessary to not only allow people time to themselves, but to also make sure family time doesn’t intrude into business time and vice versa.
Henning recommends that his clients form a Family Advisory Council to create an atmosphere that allows “real communication” within the family, not for casual decisions, but on important topics or when strong feelings are involved. All family members, spouses and even children – if they’re old enough not to cause a disruption – should be included.
“The inclusion of these meetings for my clients,” Henning writes, “has made dramatic change in their lives as individuals, families and in the company.”