Capturing the Value of Family Ownership






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    Capturing the Value of Family Ownership

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    Hi David,

    My brother and I are 2nd gen family business and cannot agree on a remuneration process for ourselves. How should we approach this as it is causing ongoing conflict in our family.

    Eloise

    Hi Eloise,

    Money and family is complex, adding the extra dynamic of business creates even more complexity. Trying to define what is “fair” can be very difficult and it not only affects family relationships but also how other employees view family members.

    The first thing I suggest is that you separate business equity from wage conversations. Remuneration for the job done needs to be clear. Consider industry benchmarks and ensure you have clear role descriptions for everyone ( both family and non-family). Having independent reviews and appraisals will also assist.

    The subject of remuneration does require open and honest communication. If those conversations become too heated I suggest getting an independent adviser such as members of the FINH team.

    Here is an article I published in Bauer Media on the subject of family business remuneration. I believe it will also help.

    Hi David

    We are a 4th generation family businesses. We are reasonably cohesive mainly due to some governance structures being put in place in recent years. The one thing we are struggling with though is getting the next generation engaged. They are becoming scattered all over the world with good education and careers.  I think that is the difference between our generation’s engagement and theirs, we stayed local because there weren’t too many other options.


    But I believe we need to get them to have buy-in for the long-term security of the family business. With holiday season approaching, we would like some of your thoughts on how other family businesses have done family businesses have done this successfully.


    Michael

    Hi Michael,

    Firstly congratulations on the longevity of your family business – that is a wonderful achievement. You have a great advantage in having the governance structures in place so I would suggest you use those structures as a way of involving your next gen.


    Include them (rotating participation perhaps) in family meetings- skyping means it doesn’t matter where they are based, they can attend. Understand what they value and ensure those values are incorporated into the long-term planning of the business strategy. Many family businesses have used community based projects as a way of getting the next gen actively involved in the family business.

    Finally use technology and family gatherings to make sure the family business story is shared- how did it start, successes and failures, information about the founders. This is proving to be a very good indicator of family business success.  


    Here is an article I’ve written for Smart Company and from Campden FB on this subject.


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    Dear David, If the family do not think that they have a problem i.e. say that we are all just stressed/tired/no time what are some good clues to start the process of making a plan.
    Dear “Right Time”, This is a great question because it is always the difficulty – how to engage ALL of the family. It is important to tell them that while they are all thinking it is ok, it is actually the time to start talking so they can come together and communicate about the things that are working in the context of planning for the future. Once you get off on a positive footing and they are communicating in a structured way (Governance at the different levels), it better positions them for dealing with unforeseen problems in the future.
    Dear David, What is a “family business”? I have many clients who are family owned and operated but they do not (and I don’t) refer to themselves as a family business. What are the benefits of calling them a family business rather than an SME?
    Dear Family Adviser, There are many. Firstly there is a lot of research that shows marketing as a family business is beneficial because people trust family businesses. Why not leverage that? Being a family business is a competitive advantage in the market. Also why not take the opportunity to create an ongoing legacy by harnessing that familiness?
    Dear David, A question I normally encounter is when setting up a business structure there is always a fear if a child is named as a specified beneficiary, they get married, then there is a marriage break down. They want the child to be named for succession purposes but don’t want the problems associated with a marriage break down. Is there a better way to approach this? D.V
    Dear D.V, This is a major area and one that requires consideration of a number of perspectives. Clearly people do not get married for the short term. You often find that separations in families when there is a business can be caused by an inability to communicate about the complexities of running a business and a family together. In the context of planning and being thoughtful around “spouses” entering the family in business unit, it is suggested that you include them in some form of formalised education and communication strategy. On the other hand when all else fails it is good to include in that education/communication strategy the introduction of Financial Agreements, also known as Pre-nups.
    Dear David, Are there certain steps that need to be completed when changing command in a family business? D.S
    Dear D.S, If the business is small then the owners and governors are probably the same. The first step is to get everyone together to communicate and make a plan. This needs to be facilitated by a third party otherwise those issues of family/business/owner all become too blurred for the participants.
    Dear David, When a family business evolves and grows to a considerable size, would it be advisable to introduce non-family members to the Board so as to get a fresh perspective and inputs devoid of the emotional and politics of family members working in a family business? 2nd Gen Family Member
    Dear 2nd Gen Family Member, Yes there is definitely a time and place for the introduction of independent members to the board of a family owned business. Global research indicates that this is a key element to sustainability; all too often families in business do not recognise the need for the governance structure and process before the selection of the external directors. You would be better placed seeking an advisor that can help with this and then importantly identification of the skills required and then seek out those skills. That contrasts with going out and getting Dad’s local golfing partner who happens to be the local professional and thinking that this is a genuine attempt at this strategy.
    Dear David, How do you convince other employees (non family) that the succession plan agreed on by the family is for the best? Family Business Founder
    Dear Family Business Founder, This is a process of change and human nature will naturally be suspicious of change. Time, “runs on the board”, ongoing communication with staff will help. You need to let them know the benefits of keeping the business as a family legacy for everyone and that you want them to be part of that. No doubt they are valued. There are many documented examples and case studies of this and I can share with you after if you like.