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Remember, Family Before Business

THE GLOBE AND MAIL – MANAGING – Thursday, February 4, 1999, B10

Note that the word "family" comes before "business" in the term "family business."

It's a trite observation with enormous significance. Too many families operate with a business-first philosophy, believing they are taking troublesome family dynamics out of the equation.

What they are really doing is planting a stick of dynamite under the business - one bound to ignite when unaddressed family concerns flare up. You can't put business first; family works together in the business, and one cannot take precedence over the other.

Taking family considerations seriously isn't just feel-good office politics. It's a question of survival.

Numerous surveys over the years indicate that about 70 per cent of family businesses don't make it past the second generation. One reason is the inability of family members to talk about how to balance the real but often conflicting needs of their business, partnership and kinship. Consider what real disadvantages this silence brings:

It's possible to avoid these surprises and misconceptions. As many a successful family has found, sound management often begins around the dinner table, not the boardroom table. In other words, family meetings have to become an important part of managing the business.

This means setting aside a day or two for family members - those in and out of the business - to get together and establish a code of conduct. It's a chance to set out policies that reflect both your family and your business values.

Not that it's as simple as that. Questions about who will lead the business, work in it, own stock and how family members will be compensated are usually major areas of conflict. The real challenge is to keep the family meeting on track without allowing it to deteriorate into a 10-round extravaganza.

Taking family considerations seriously isn't just feel-good office politics. It's a question of survival.

Here's a short primer. Before you start, however, remember that the family meeting is the first step in a healthy transition from no communication or communication in emergencies only to a true family dialogue. Success may be measured in increments.

Nobody gets home ice advantage. Don't hold the meeting at someone's home. The best venue is on neutral ground away from the shop and the telephone. Rent the back room of a restaurant.

Everyone gets a say. All family members should participate, whether they are active or not. For some participants, it is the first opportunity to voice concerns rather than keeping quiet for the sake of perceived family harmony.

Deal with all the Issues. That's the rule, but apply it judiciously. Ideally, a business family should be able to deal with sensitive questions, but families are seldom perfect. I urge families to consider issues that are critical to the success of the family, owners, managers and individual interaction.

Managing the transition. One of the most crucial agenda items is succession. The family leader must face the reality that nobody lives forever. Does the family intend to sell the business or will the leader identify, train and install a successor? How will share ownership actually be transferred?

Management continuity. If the next generation plans to participate actively in the business, the family must consider how they must prepare themselves educationally, professionally and personally. What do they need to do now, in five years and beyond?

Rules of entry. The family must define rules of entry for new family members, particularly nieces, nephews, cousins and in-laws of current managers. What are the rules regarding standards of performance, compensation and stock-ownership?

Preparing children. The family should consider what it tells the children about the appropriate educational background and outside experience they need before entering the business.

Family communication. In addition to examining issues and possible solutions, a retreat should result in a commitment to a shared future as well as more formal and informal family meetings.

The fate of the business relies on the family's commitment to a shared future. It's hard to hold the family together for a shared future if members don't talk. That's what a regular family meeting and a code of conduct can accomplish.

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