Fundamental Elements of a Successful Family Business
Whether yours is a family business or not, there are six key principles the most successful family enterprises follow.
As you read about them, ask yourself: “How can I apply these to my company?”
Governance – what amounts to the responsibility hierarchy – adds important structure to the operation of the business.
In a family business, clear governance provides harmony since everybody knows his or her place in the organization.
The basics include:
- Ownership – delineate who has a share in the business and who will have a pathway to ownership.
- Management – decide if non-family members will be granted management positions.
- Vision/mission – provides direction and purpose to maintain focus on what the business is all about.
Preventing barriers from arising between employees (especially family) requires open communication. Walls are easily built on the bedrock of silence but are impossible to assemble on flowing rivers of communication. It’s also good to have a communication policy in place that delineates how
Fundamental elements of a successful family business communication will take place, i.e., how proposals are routed
to decision makers, etc.
To keep things running smoothly:
- Put important information in writing – doing so helps clarify intentions and adds some legal protection if done properly.
- Meet face to face – don’t rely on hallway chats or family gatherings outside of the office to conduct important business.
- Actually read emails – don’t say you didn’t know there was a problem if someone sent an email to inform you.
Failed leadership succession presents a threat to any business. You need someone who can responsibly run the business in your absence. Family businesses that have survived transitions did so with the help of established,clear succession plans. If your successor is someone outside the family, everyone should know well in advance.
Succession planning should include:
- A written plan – codify your vision for the company after
you’ve left and if the business will be kept in the family
or sold to employees or an outside buyer.
- The value of the business – you may want to seek outside
help from a financial professional.
- Buy-sell agreements – avoid ensuing chaos if something
unexpected happens to you.
Like communication, transparency keeps personal barriers to a minimum, hinders gossip, defuses speculation and builds trust. It helps foster a higher degree of morale and job satisfaction because employees feel involved.
Ways to implement transparency include:
- Hold company town halls – invite questions and give answers. Share corporate objectives – employees feel they are
working toward shared goals and become more engaged.
- Have an open-door policy for executives – this bold move can build valuable interpersonal connections.
Everybody in your business has responsibilities. But are they clearly defined? Are there metrics for success? Especially in a family business, delegating the wrong responsibilities or leaving roles undefined can lead to strained relationships.
When assigning responsibilities:
- Play to strengths – be sure the assignee is up to the task.
- Set expectations and metrics for success – it’s easier to pursue milestones.
- Provide the authority to carry out the mission – workers appreciate the ability to make the necessary decisions.
Creating a culture of accountability among your employees will hopefully translate to their interactions with customers,
as well. In a family business where familiarity can lead to placing blame on one another, formalizing accountability can help avoid these contentious situations.
- Provide written guidelines – this can include best practices.
- Make accountability part of the review process – employees
are responsible for their successes or shortcomings.
- Be accountable yourself – remember, you’re at the helm. When you make a decision, own it.
These principles form the bedrock of successful family businesses, but there are lessons here for any business owner. If you’ve established similar practices, but have let them lapse, renew your efforts to give your company the best chance at continued success.
Any opinions are those of Sweet Financial Services and not necessarily those of RJFS or Raymond James. The information herein been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.