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FAMILY
BUSINESS MATTERS (Part 1)
Much has been written about family
businesses over the years to the extent that one may
wonder if anything new can be revealed about this
ongoing enterprise. With the benefit of having been
involved in family businesses for many years, we would
like to raise a few questions to create further thought
on some issues that have been with these businesses
since the beginning of time.
·
What are the main issues that influence
the short and long term decisions in a family business?
·
Who shall be involved in the family’s
business?
·
When should the Founder leave?
·
Who shall succeed the Founder? How and
why?
·
Building a management team – family only?
Bring in from the outside?
·
How should responsibilities be delegated
or shared?
·
Should compensation be directly related to
responsibilities/abilities, or is everybody treated the
same?
·
What is the relationship of spouses of
family business members?
This list can go on and on, based
on the wants, needs and desires of each of the family
members. Can any or all of these issues be resolved
from within, or should there be a dispassionate,
unrelated third party involved in order to keep things
on an even keel?
There are as many answers as there
are family businesses. There are no easy or standard
answers to any of these questions. Each question must
be considered as to its impact on the individuals and
the family as a whole, as well as how it relates to the
future success of the business.
For the purposes of this article, I
would like to address the first four questions raised:
·
What are issues that influence the
short and long term decisions in a family business?
·
Initially, Founder needed a job, or a way
to make money
·
Growth and prosperity of Business over
time
·
Offspring joined Business as "the thing to
do”
·
Founder ages and does not change with the
times and stay competitive
·
Next generation wants to take the business
to the next level but Founder is averse to further risk
·
Friction develops between
generations/siblings
·
Will the enterprise survive as a family
business? Should it survive?
·
Purpose of Business often changes over
time
·
Who shall be involved in family’s
business?
·
Ultimate decision made by Founder or
Senior Management
·
Determined by ability, not standing within
family
·
Exit strategies, severance, and
compensation should be determined in advance
·
Performance evaluations and metrics should
be consistent across the board, for family, in-laws, and
non-family
·
When should the Founder leave?
·
Pre-determined date or age
·
Physical/mental capacity has diminished
·
Changes in the Business are so dramatic
that the founder is no longer capable of dealing with
them
·
Who shall succeed the Founder?
·
A family member? Decision based on
experience, vision, and ability, rather than age or
standing within family
·
A highly qualified “outsider?”
·
In either case, what skills and talents
are needed?
·
Succession plans should be always be
created and agreed-upon well before they are needed
As you can see, there are a number
of very personal issues that affect a family business,
many of which are more complicated than those
encountered in a corporate setting. However, most
experts agree that successful family businesses make
every effort to keep business issues and family issues
separate.
This is where a trusted Board of
Advisors can provide real value. How do you sort out
the facts from the perceptions about what is happening
internally within your organization? How do you figure
out what external influences, events, and opportunities
are going to have an impact on your company’s products
and services? With whom can a leader talk to get both
strategic and operational advice and support – without
any hidden agendas? These are crucial issues that can
determine the future existence of a family business, and
a corporate Board of Advisors can view them objectively,
without the emotional attachment that family members may
have.
Go to Part II >>
By Jeffrey P. Ross
© 2003 RossFialkow Capital
Partners, LLC
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