Communication is key to family business success

April 24, 2015

 

peter johnsonA father and daughter desperately want to work together in the family business but the dream is never realized. A son yearns to live his own life and make his mark on the world outside of the family business but sadly spends the next 45 years running the family business instead. A father leaves all his money and the family business to charity without telling anyone including the family members who toiled in the trenches with him for years.

What do all these scenarios have in common? They all created heartache, lost dreams, missed opportunities, and potentially could have torn apart families, yet they could have all been avoided with proper communication.

Over the years I have had the pleasure of working with many family companies both domestic and international.  These firms range from relatively small companies (representing a single generation of family members with annual sales around $1 million) to companies that were quite large (employing several generations of family members with sales in the multi-billions.)

Each and every one of these companies has faced challenges revolving around communication.  Their communication models have ranged from centering around one or two key people to a completely formal communication process that ensures critical issues are addressed in a timely and efficient manner.

Family firms generally start out with a dad calling all the shots, although typically there is a mom influencing dad behind the scenes especially when it comes to family issues. Dad provides the voice for the business and mom (many times acting as the CEO — Chief Emotional Officer) provides the voice for the family concerns. This type of communication is clumsy and unreliable at best. It assumes key issues will be addressed by someone with strong leadership skills who is unafraid to put important yet sometimes delicate or emotionally charged issues on the table for discussion.

Many times families don’t understand the issues until it’s simply too late. Take the father and daughter who dream of working together. Dad doesn’t want to influence his daughter to work in the business if that’s not her dream. The daughter is afraid that if she opens a discussion about working in the family business it will put pressure on her dad to hire her. Instead neither says anything and it’s not until 10 years later that they both learn the truth.

In some cases the daughter or father might confide in mom to see if mom has a sense of what the daughter or father is thinking. This is called triangulation and works in many circumstances. However, if families don’t have this option and they don’t have a formal communication structure in place, it is even more important that they find a vehicle for fearless communication. They need to be able to lay out the issue objectively in a well thought-out and respectful manner without the fear of being hurt or hurting their loved one.

As family firms grow the challenges become greater. The communication channels no longer just include one or two key people. With the addition of the many brothers, sisters and other relatives  both the issues and the communication channels can grow exponentially. At this point it is critical that family firms put structure in place to ensure critical issues are addressed and diplomatically discussed (not swept under the rug and allowed to fester).

One opportunity is for families to establish a family council. Family councils allow families to keep the family issues out of the boardroom and out of the day-to-day management of the company while creating an avenue for the family to communicate openly about their challenges.

One hot topic family councils often address are family employment policies. The creation and implementation of one of these policies is a great way to ensure that everyone in the next generation shares an equal opportunity to enter the business.

A family employment policy might lay out what jobs are available with or without a college degree, and whether or not outside experience is required. Such a policy might provide opportunities for family members in high school to interact with the business in ways that educate the student on the value of joining the family business. It could also help family members ascertain the next generations’ interest level in joining the business as well as the intrinsic value the younger family member could bring to the table.

Communication is key in the success of every family business and creating a formal way to communicate ensures the important issues are addressed and the hopes and dreams of family members are fostered and fulfilled.

 

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