1. What are our core family values and how do they impact our success?
Family values are defined as the underlying beliefs, principles, and ambitions of the family. A shared value system can unite family members and provide a framework for relationships with customers, employees, and the community. Values serve as a compass to help organizations navigate difficult decisions, drive practices and policies, and distinguish itself from non-family run organizations. How do you best understand and identify your family values? Look back at your family business history. Identify pivotal points in the organization and define the value characteristics that best define how your family responded.
2. How do we deal with inherent conflicts?
All family businesses inevitably will experience conflict. Family run organizations operate in three spheres – ownership, business, and family. This is widely described as an intersecting three circle model, and the intersection of the three spheres is where you encounter common conflicts. Some issues that create the most tension include the direction of the business, roles and responsibilities of family members, and compensation. Having family business advisors, outside council, or more formal governance structures can help to navigate and minimize conflicts.
3. What governance systems do we have in place?
Many family business organizations begin with a founder whose entrepreneurial vision launches and builds the business. They prefer an independent operating style and full control over decisions and direction of the organization. As the founder looks to engage the next generation and families begin to expand, there is the need for a more formalized governance structure. Governance structures assist in developing family relationships, support effective decision making, and strengthen accountability of all stakeholders. Board of Directors, Ownership Agreements, Family Meetings, Family Councils, Family Foundation and Family Office are some common examples of systems that are available as the family grows and ownership becomes more complex.
4. Do we have clear compensation and equity arrangements?
Unsurprisingly compensation and equity are often the most contentious issues in a family business. What are the expectations of the family members (active and non-active)? What is fair? What is equitable? Family organizations should have well-defined job descriptions, compensation packages, and promotion criteria for both family and non-family members. Some organizations separate equity and profit structures to ensure that the distribution of profits to family members is documented and fairly distributed to avoid additional controversy. Equitable is not necessarily equal for many family run organizations.
5. What are the obstacles facing family businesses today?
All businesses are currently challenged with talent and retention issues as well as implementing growth and innovation strategies. Family Businesses are also challenged with unique obstacles concentrating in areas of family leadership and ownership. In a recent survey of family businesses in West Michigan, leaders identified they are most concerned with properly preparing the next generation, adapting governance strategies, and implementing their family values. In terms of ownership challenges, they are looking for information and resources on shareholder responsibility, evaluating equity, and shareholder agreements.
6. Do we have a business succession plan?
If you do not have a plan, you’re not alone. According to a recent study by PWC, only 34% of family run organizations have a robust, documented, and communicated plan in place. Succession plans should incorporate all aspects of a family business including ownership, governance, and leadership. Succession planning is a long journey and often includes defining when family members may work in the business, how profits should be distributed, who may serve on the board, preparing future leadership, and other matters such as taxes, liability, estate planning, ownership stakes, and voting rights. From planning to transition, succession implementation can be a seven-to-ten-year process.
7. How am I engaging the Next Generation?
As they say, “All the flowers of all of the tomorrows are in the seeds of today.” Successful succession planning begins long before the next generation can determine their future career choices. Engagement for family run business should include education, communication, and collaboration. Formal and informal education should include sharing and documenting family history and family values. Whether at the kitchen table or a more formal family meeting – these are key opportunities to share information. Families should also explore digital communication vehicles (websites, social sites, or newsletters) to build and connect family members. Finally, creating collaborative opportunities around a project or charitable giving provides tangible experiences to build relationships, reinforce values and cultivate engagement.
8. Do I participate in the family business community and take advantage of resources?
While every family business is different, many share the same operating challenges. Connecting with and learning from other family business organizations while developing a confidential and supportive peer network is a great way to tackle these dynamics. Sustaining a family business is a journey, but you don’t have to do it alone. Family Business Alliance seeks to help family organizations in West Michigan thrive by creating connections, navigating governance, and elevating leadership for over 165 member organizations. Learn more about how we want to help your family organization at fbagr.org.