The five pillars of a successful family business
The five pillars of a successful family business
Every business aims to be successful; however, when family dynamics are added to the mix, a new set of opportunities and risks can emerge. Daily management and strategic planning for integrating a family business can often become less of a priority. The nuances of family relationships add a layer of challenge to family business integration that can make it seem difficult to achieve success. This should not discourage you from investing the time if you are interested in keeping your family business going for years to come. A properly structured and well-managed family business can create significant value that is well worth the time and effort. Conversely, failure to structure the business can complicate the business and family relationships in the long term.
In this article, we will guide you through five key pillars of a successful family business and provide key learnings to help ensure your family business is set up for success well into the future.
1. Effective communication is key
The most important but difficult attribute of any successful family business (and business in general) is communication. While communications in business can be direct and impersonal, dealing with family may not be the same due to complex relationships, non-business interests, the blurring of the lines between the office and home, and conflicting roles as a parent and boss or employee and relative making it difficult to know what tone and language to use. It is imperative to consider the aspirations and objectives of family members and communicate key decisions with these in mind. Appropriate messaging can assist with buy-in or minimise reactions due to an improved understanding of decision-making factors. This is also vital to ensuring that everyone is working towards common goals.
Being able to work through issues as they arise and constructively find solutions as a team is a key skill in business and will set your family business up for success.
2. Make good governance a priority
A business without good governance is a business set up to fail. For a business to be successful, it requires a robust governance framework to allow stakeholders to be involved and work as a team to achieve the objectives of the business. Stakeholders must be willing to accept responsibility and have full accountability. In achieving this, each business will have a different governance structure tailored to suit the business needs. Many clients find success in regular meetings to discuss governance matters. In some instances, an advisory board could be more appropriate for your business. Good governance allows businesses to manage the requirements and aspirations of all stakeholders in achieving the desired outcomes, while also managing the needs and requirements of the business. This could involve determining whether the business requires additional funding or reinvestment, or if the shareholders would prefer a return of profit.
3. Develop a succession plan
A clear succession plan is critical for any family business. For a business to continue for generations, it cannot just rely on the founder. A clear succession plan that is communicated to all stakeholders is essential to avoid conflict and provide a framework for the future objectives of the business. Leadership within the business could encompass management succession, which includes roles within the business and the day-to-day running of the business, or ownership succession, which relates to a shareholder role. This will allow the next generation of leaders to adequately prepare and plan for their future in taking over the leadership of the business. Younger generations are well positioned to offer valuable insights into how the business may need to adapt. Their familiarity with emerging market trends and technology, along with an understanding of how the business may be evolving as their generation takes the reins, makes their perspectives particularly relevant. This is important when family businesses have joint ownership with cousins and other distant relatives.
4. Set clearly defined roles
Defining roles for all stakeholders and family members working in the business, sets clear expectations for remuneration and responsibilities. Having clear job descriptions in place and available to all family members helps ensure everyone is on the same page and working towards the business's objectives. Identifying people’s unique talents, ensures efficient specialisation and increases their satisfaction and contribution. It also opens opportunities for recognition for high performance and can provide support to improve underperformance. Implementing these measures can limit potential conflict arising within the family when expectations are unclear or, unfortunately, not met.
5. Have a plan to overcome challenges
Sometimes life doesn’t go as planned. The business might have excellent communication, a strong governance framework, and everyone working together towards the objectives with a clear succession plan. However, what happens when challenges arise? How do you work through those challenges? This is a key measure of any successful family business. Successfully navigating challenges as they arise is crucial for success and longevity. If your business is struggling with this, having the right advisers in place is imperative to overcome these challenges.
Future-proofing your family business
Despite having everything set up for success now, the family business is a complex, long-term process. As a result, it is wise to have appropriate strategies in place to ensure the life-long success of both your business and your family. Our team of family enterprise experts has extensive experience helping family businesses with succession planning, governance, and effective communication strategies. Contact us today to learn how we can support you in future-proofing your family business with tailored, specialised services.