When you ask a Family Business, what do you hope to get out of this engagement? They all have the same answer....
“I want to be able to have Christmas lunch with my family”
As advisors we spend a lot of our time training, up-skilling and learning to ensure we can offer the best advice to our clients and their businesses. But it is important, every step of the way, we never lose focus of what the family wants.
The two key areas I focus on to ensure my clients grow their family business and achieve their ultimate goal of that Christmas Lunch is:
- Family Governance; and
- Succession planning.
Why is governance so important to a family business and family harmony?
In a family business every family member is juggling multiple roles in the family, in the business and in the ownership of the business. You may also have some family members who are not in the business and can feel an outsider within their own family.
As much as the strength of a family business is their agility and speed to market, without a governance structure in place, this can also be their biggest downfall because as quick as you can decide on a decision, it can also be stopped in its tracks just as fast! And this is where a business can start to unravel and so can a family.
A governance structure is crucial to a successful family business and a happy family. Governance includes many aspects such as a family constitution, family council, family assembly, owners Room and an advisory panel. But the first step is just to set up regular meetings, ensure they have an agenda and I recommend an Independent facilitator. This will ensure your meetings stay on track, every one has a say and is heard and family matters never surface around the boardroom table. It also allows you to have a structured family meeting once or twice a year where all family members are updated on the business, so family members who don’t work in the business feel included.
Governance is something that evolves over time, it should never be considered something that you set and forget.
What does succession planning have to do with family harmony?
Succession planning is a topic families prefer to avoid. Retirement has become a “dirty word” in society and also the next generation don’t want to think anything will happen to their parents. And this is why i try to move the succession planning conversation away from retirement. It is about having a plan in place should anything ever happen. As parents we want the world for our kids but interestingly, we don’t consider, if we don’t have the discussion now, we could be causing our kids a lot of unnecessary stress in the future.
A succession plan, isn’t all about the plan, it is about the open conversations you have with your family in developing the plan.
I focus on what I see as the 7 barriers that can block a succession plan. They include:
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Financial Security - many family businesses have all their wealth tied in the business.
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Retirement planning - have you thought what you want to do when you retire. Your family business has been so fulfilling for so many years, just golf won’t be enough!
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Election of a successor - have you discussed with your next gen to see who is interested?
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Education - the benefit of time is you can train and mentor the next gen to ensure when the time comes, they are ready
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Disaster and recovery - do you have a plan in place? The biggest disaster can be the loss of the Matriarch or Patriarch.
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Objectives are aligned - do all family members have a shared vision for the future? Have you discussed and agreed upon your family values?
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Managing Communication - do you have effective governance in place to ensure all family members have a say and their voice will be heard.
I recommend all family members are included in our succession planning discussions. Even with the best intentions, when you leave someone out of the discussions, they can be your biggest disruptor. This not only puts the business at risk but more importantly the family harmony.
So as you head into the festive season and start to think of your Christmas shopping, putting up the tree and all the Christmas lights, planning the lunch menu, stop and think, do we have everything in place in our family business so we can all enjoy Christmas lunch together?
If you'd like some assistance with any of the topic's raised in this blog, check out Grant Thornton Australia's members page by clicking here.