How to Make Family Businesses Work

staff-engagementMy business partner and I have had the privilege of working with many family businesses over the past few years and particularly enjoy this since family members are naturally so passionate about seeing the business succeed.  However, on occasions the business relationships can get blurred by the family relationships, for example if all family members share equally (or proportionately) in the proceeds of the business success, how do you determine who makes what decisions and who reports to whom?  I have seen this cause frustration and confusion and unfortunately in some cases even broken family relationships, so how do you reconcile the relationships conundrum?

The key to being able to sort this out effectively comes down to something I have focused on a few times in the past: organisational structure.

It may be tempting to think of Org Charts as something only big companies need or simply showing who reports to whom, but the truth is more subtle and powerful than this.  Their true value becomes apparent when you view the structure as an “organisational architecture” (i.e. enables and facilitates growth) that clearly identifies who is responsible for each of the key business functions and hence for setting the business priorities in each of the respective areas.  It then becomes clear that everyone has a key role(s) to play as opposed to just showing who is who’s boss.

It is important to note that the Org Chart shows operational and executive responsibilities within the business which is separate to a Board of Governance or Directors that will be responsible for overall governance and guidance for the business as well as determining the distribution of any proceeds from the business.  In this way, family members can have an equal say on business governance without hampering the operational execution of the business.

May not solve all the issues, but in our experience, this is a pretty good place to start.

What other steps help preserve relationships in family businesses?

By Ian Ash