How to Communicate in a Family Business

How to Communicate in a Family Business

Leon Gettler has recently written this article for the on the importance of communication in the family business. It highlights what we often tell our clients, “a little bit of structure goes a long way” when it come to family business communication. In a more formal sense it can result in a family council and charter which we have implemented for many of our clients. It is never too late. David Harland – Family Business Advisor

Communication is one of the crunch issues in many family businesses, the kernel of every relationship. If it’s important in business, it’s even more so in family businesses. Communication is the source of the most tension – when certain family members feel they’ve been left out of the loop, it creates problems later on.

Communication conveying high quality information should be a given in any family business that is planning on long-term survival. The quantity, quality, style and frequency of that communication is central to strategic decision making and conflict resolution. It comes out of conversations that happen every day which emerge from formal structured arrangements and, just as importantly, from informal interactions.

But what happens when people have trouble communicating? What happens when a family business doesn’t have the systems for it?

It’s more common than we think.

According to a survey by MGI, 86 per cent of family businesses had no rules to strengthen interpersonal relationships and manage the expectations of family members and 82 per cent had no policies to deal with predictable family-in-business issues before the need arises. Alarmingly, 72 per cent did not hold regular family meetings to share information, build trust, avoid politics and achieve consensus.

There could be a number of solutions to address this. The first is for certain family members to undertake personal development courses to build communication and negotiation skills.

The next step is to ensure that all parties are committed to a family business plan. It has to be discussed and formulated. The family business could then create structured processes designed to keep information flowing through the business. This can be done in several ways.

The first, and most obvious, is to create a family forum. It can be held at a venue. Some take the form of a retreat at a hotel, resort or some exotic hideaway. Wherever it might be held, the family members get away for a long weekend to discuss issues like how the business is travelling and forecast ahead, the vision of the family business, appropriate disclosures on finances, leadership, managing change, including generational change, corporatising parts of the business and making it more professional, career development and promotion of family members, training, disciplining and firing family members, entitlements and responsibilities, including distributions to family members not working in the business, and the continuity of the business, including options like acquisitions, sale of the business and merger.

As a rule, everyone should be invited and everyone should be allowed to speak without fear of reprisal. Anger can be legitimate if it’s expressed in a healthy and constructive way, rather than destructively and conflict can be seen as an opportunity to manage differences of opinion. By encouraging people to openly talk about their different views and disagreements in a calm and structured way, the people running the forum can develop a culture of positive conflict awareness so that new ideas and fresh approaches to work are generated and explored. There should be no powers of veto. The aim of the forum is to inform, encourage debate, problem solve, manage conflict and generally work through all the key issues. The forum needs to be well managed and have a formal agenda.

Forums were the place where the Ancient Greeks would meet to discuss issues and, handled well, the forum can stimulate ideas and take the family business forward and be incorporated into the family constitution. Handled badly, they can end up like the forums in ancient Rome where the Christians were fed to the lions.

The next step from the family forum would be setting up a ‘family council’ which acts like a board of directors for the family – a board of elders if you like with representatives from each branch of the family. The council serves as a contact point between members of the family and the business, and moderates issues. Meeting every few months, the council would look at issues like remuneration and entitlements, shareholder agreements for buying and selling shares, getting the next generation involved, succession planning and leadership transitions.

The business should also look carefully at written internal communications setting out all the decisions, ensuring that everyone is on the same page. Having it down for the record also avoids the “he said/but he said” scenario where everyone is working off attributed statements.

Ideally, these processes should prevent conflicts, build trust, manage the politics, build consensus and deal with all the predictable family business issues before the need arises. In the end, it’s not about communication per se but about the willingness of the family to set up tools and processes to identify problems and issues before they happen, creating a unity of purpose that’s the feature of every successful family business.

For more information on bringing family governance structures contact FINH on 07 3229 7333

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