By David Harland, FINH’s Managing Director
Most family businesses have humble beginnings. Someone has an idea or sees an opportunity and decides to give it a go. What usually follows is a lot of hard work and ups and downs, until the business meets that inescapable fork in the road called ‘Decision Time’… do we keep the business going or fold it and do something else?
While there are many that take the decision to fold, there are also many that go on to succeed beyond the wildest expectations of the founders. As both the family and the business grow, they stop being separate entities and merge into one. The family is the business and the business is the family.
The Kitchen Table Forum. More Tea Anyone?
During the organic growth of a family business, the kitchen table metaphorically becomes the forum for decision-making on all the factors that need to be addressed. I suspect that author Joseph Conrad was talking about family business when he said “… a sane view of life is, after all, elaborated mainly in the kitchen.”
To me, this is the classic expression of the very ethos of family business. The ‘kitchen table forum’ is emotional, informal and, truth be told, an effective way to run a business until it reaches a significant critical mass.
So, just when management is thinking that the ‘kitchen table forum’ is working well, the day arrives when another inescapable fork in the road comes along… called ‘Where to from here?’
Here’s how you can recognise it:
- The founders of the business are pulling back and playing a less hands-on role.
- The business has reached a critical mass that requires serious management because competitive market forces demand higher levels of production, product quality and marketing efficiency to ensure continued success.
- Family members have been introduced into various roles including management. Younger family members are looking to the business as their future and you need to take steps now to make sure they get the education and training to equip them.
- Human resources have become vitally important and retention schemes are needed.
- Innumerable issues such as funding, R&D, taxation, compliance and so on demand attention and you are more and more looking to outside consultants for assistance.
Know the feeling?
Going to the Boardroom Table. One Step at a Time.
The first step I take with my family business clients in the journey from the kitchen table to the boardroom table is by assisting in the creation of a Family Council.
The purpose of a Family Council is to channel family decision making more effectively by bringing clarity, formality and accountability to the decision making process.
The majority shareholders, usually the founders, have to take the decision to create a Family Council and decide who’s going to be on it. Of course I assist them in its structuring, but at the end of the day it’s their decision.
Then, once the Family Council is functioning smoothly, it is often time to consider the formation of a Company Board to gain input and contribution from highly skilled and experienced professionals across a number of disciplines.
The key points in forming a Board are:
- The Family Council chooses and appoints the board members.
- It’s critical to first define the roles that Board Members can play to provide maximum benefit to the business, and then choose the right people to fill those roles.
- The Family Council gives direction to the Board on its strategic goals, its business and community philosophies and its plans for succession.
- This clear direction enables The Board to function efficiently with the clear goal of satisfying the brief they have been given.
It’s all part of being a fully integrated family business.
A Family Council and a Company Board are parts of the jigsaw puzzle that makes up a fully integrated family business. All decisions, whatever they are about, must be part of an integrated plan which is totally comprehensive and gives a clear and co-ordinated pathway to the immediate and the future.
They say a journey of 1000 miles begins with one step… so, if you have reached that “Where to from here?” fork in the road, I recommend that the first step should be the formation of a Family Council.