Family Business Structures

When you cross the business threshold: you must all go into “commercial mode”. Do right by the business, and do business right – or there’ll be no business

Family Business Structures

Structures are tangible “things” that aid professionalisation and best practice processes by providing more clarity, substance, formality, authority and discipline to business operations.

We establish, guide and facilitate all of the following structures to suit individual families and businesses.

Like Family Structures, Business Structures come in two forms: (1) Bodies; and (2) Strategies, Plans & Agreements.

Family Business Structures (1) – Bodies

Board of Directors

The Board of Directors of a company is its supreme governance and strategic decision-making body. It’s primarily responsible for strategic thinking, corporate governance, risk management, reputational protection and executive / operational supervision.

External Directors are invited onto a company’s Board to increase its depth and breadth of experience, to boost business ‘nous’, to widen business networks, and to provide more sophisticated strategic and independent thinking. A good director makes themselves an investment, rather than an overhead, by increasing sales and/or productivity and/or profitability and/or value.

Boards are an essential element in most successful succession plans. They provide the perfect place for parents to go after they reduce their day-to-day involvement in the operational affairs of the business, and still want to remain in touch with what’s going on.

They provide an ideal forum for emphasising and teaching the difference between strategic and operational responsibilities – and for coaching and mentoring former business leaders into their new support roles within the succession process.

We help to establish Boards; develop their charters; define meeting processes and decision making rules; create appropriate governance charters and facilities; and coach and mentor board members in their roles.

Back to top

Advisory Board

This is a Clayton’s Board – the Board of Directors that isn’t. Members of an Advisory Board are selected for their expertise, which should be appropriate to the needs of the business at that point in time. Members often includes professional advisers, who may not wish to sit on a real board, for liability reasons.

Advisory Boards are widely used in family businesses that aren’t ready for full-blown Boards of Directors, or that can’t get people to accept formal Board positions, for various reasons. They do the work of a normal Board – strategic inputs and guidance, performance supervision, reviews of business results and special projects.

The main point of difference is that an Advisory Board doesn’t have any decision-making authority, it can only make comments and recommendations to the actual (legal) Board of Directors – which then has to make the actual decisions that are carried out in the business.

Savvy Advisory Boards are careful to be seen and heard and documented only in an advisory capacity. If they are seen (or construed) to make actual decisions that are acted upon in the business their members may be regarded as “deemed directors” for legal liability purposes.

Because Advisory Board members are appointed for their knowledge and skills, these boards can be good places for family members to observe and learn about the responsibilities of being a director. For up and coming next generations of the family, this can be one of the best forms of preparation for moving onto a Board of Directors, when the time is right.

We help to establish Advisory Boards; develop their charters; define their meeting and problem solving processes; and coach and mentor board members in their roles.

Back to top

Senior Executive Team (“SET”)

Some families and businesses like to have a small inner circle of one or more highly trusted senior executives who are usually well informed about sensitive family and business issues.

The SET is used by business owners as a sounding board and as a rapid response team for urgent and delicate issues they don’t want to share with the broader management team.

The SET may comprise some or all of: CEO, CFO, HR Director, and Company Secretary / Corporate Counsel. During Succession and Business Professionalisation processes it may also include other business “Chiefs”: CMO (Marketing); CTO (Technical); CPO (Production).

We help to establish Senior Executive Teams; develop their job descriptions; define their meeting and problem solving processes; and coach and mentor members in their roles.

Back to top

Executive Management Team (“EMT”)

Family Businesses are notoriously autocratic – although owners especially are often shocked to discover that is how they’re perceived. For all their charm, a lot of decisions are made on an individual, or family-only basis, and are simply imposed upon staff, including (nominal) senior managers.

There may be little two-way communication on strategic issues, which is shown to be a sad waste of opportunity when staff are invited to participate in strategy planning and business improvement talks, and then produce great ideas they’ve secretly harboured for years, feeling they weren’t entitled to express them!

We help to establish Executive Management Teams and their supporting communication systems; develop their job descriptions; define their meeting and problem solving processes; and train, coach and mentor members in their roles.

Back to top

Family Business Structures (2) – Strategies, Plans & Agreements

Values, Visions & Goal Setting

Values are the underlying drivers that make us want to do, what we do, the way we do it.

Admirable people, families and businesses have their values (intentions) and their cultures (how they do things) closely aligned – so they actually do things the way they tell everyone they do things. In that sense a family business operates as a reflection of the family that lies behind it.

Goals define and describe what we want to achieve in the future. They can be personal, professional, financial, or many other things.

Visioning is the process of identifying individual and collective values and goals, and using them to help a family create “a vision” of where they want to be, and what they want to have achieved, at some time in the future, usually quite a few years hence. This creative and often emotional journey of the mind and spirit provides powerful bonding for the family and ultimately provides a solid foundation for making and living out long term Family Plans.

Defining and sharing individual and collective Values, Visions and Goals is essential to achieving personal and family Clarity, Certainty andCommitment.

Back to top

Strategy Plans

Strategy Plans take agreed Values, Visions & Goals and turn them into recognisable directions of travel for your business, using associated milestones and quantifiable commercial targets, such as gross revenue, net profit and ROI.

We use Strategies to help make the best possible plans for the future by engaging with everybody: (a) who can make a meaningful contribution to a plan and (b) who needs to know, understand and support the plan to maximise its prospects for success.

The Strategy Planning process takes place through a series of facilitated meetings. It’s a powerful motivator in the business that provides an effective means for communicating purpose and intent, and for measuring and recognising performance and success. It’s also an essential risk management tool.

No business that takes itself seriously should be without a live, up to date, written and fully communicated Strategy Plan. When all staff know, understand and work to The Plan it’s succeeded in linking Clarity (knowing what you’re going to do); with Certainty (knowing how you’re going to do it) and Commitment (agreeing to get on with the job).

Back to top

Business Plans

If Vision and Strategy define the head and soul of a business, Business Plans comprise its beating heart, bones, blood, muscles and sinews. They include detailed forecasts, budgets and cashflows, supported by productivity, marketing and task allocation plans that assign specific responsibilities, authorities and accountabilities to specific people.

Nobody has anywhere to hide when Business Plans are done properly, since everyone that should be involved is involved in developing them, and the outcomes are hard numbers that shouldn’t waver under pressure. Accounting and Management Information Systems measure and report on the performance of the business through the numbers they capture and process, and the people responsible for results are measured against the cold hard light of their achieved results against planned results.

Business Plans take a leader’s Visions and Goals, refine them through the Strategy Plan, and turn them into measurable Action Plans that help managers to run the business efficiently and profitably.

Business Plans translate Clarity into Certainty. Once published, distributed and acknowledged, everyone can see what’s to be done, how it’s to be done, when it’s to be done, and who’s to do it.
Business Plans also have a major role to play in locking in Commitment. When individual tasks, performance expectations, authority, responsibility and accountability have all been agreed and locked in, personal and peer pressure help to ensure strong performance.

Preparing Business Plans is an intense exercise, usually completed in the months before a new financial year commences. Most of the work is handled by in-house accounting staff.

We help to set up the processes and systems required to complete the planning work effectively, year after year.

Back to top

Succession Plans

Succession is the process of replacing the existing leader(s), owners and managers of the family with a new generation of key players. This multi-faceted challenge puts enormous strains on everyone and everything and, regrettably, there are many more instances of botched successions than successful ones.

The old cliché is that succession should be: “a process, not an event” and:“it’s not a question of “if”, it’s a matter of when”. That said, all too often succession is seen as a fear-filled threat to incumbents, rather than as an opportunity to step aside to make way for the next generations – proud that you’ve helped to them to become, or have the potential to become, better than you. After all, isn’t it the job of every wise parent to enable their children to: “stand on your shoulders, not just stand in your shoes”?

The natural Circle of Family Life requires constant regeneration and renewal. Succession should be treated as just another part of planning for family continuity.

We provide a complete succession planning process, whether the intention is to pass the business down the family line, or to sell internally or externally.

Back to top

Organisational Structures

Early in the process of professionalising the business we develop an organisation chart based on the way the business actually functions. This visual representation of the business “system” often throws up interesting issues, such as the business being built around the people available (especially when they’re family members), rather than the functions that need to be performed – thereby limiting commercial efficiency and depressing team spirit and motivation.

The org. chart helps to identify management and operational deficiencies. It is used to help explain, understand and justify much of the business re-design that may need to take place to restore or enhance commercial competitiveness.

Significant outcomes include: divisional restructuring; personnel reallocation; improved job descriptions; greater role clarity – with associated responsibilities and accountabilities; specific KPIs and other performance measurement and enhancement initiatives.

Even in small businesses, we can usually identify a number of non-family staff in key managerial positions who, we feel, should be given more authority, responsibility and accountability as a major step towards operating a more professionally managed business.

We may also identify critical skills shortages in the organisation and can help with the recruitment process.

At a structural level we may create or formalise the workings of a Board of Directors, or Advisory Board (for strategic issues) and an Executive Management Team (for operational matters), as described above. The benefits to the business, the family and the individuals involved are multi-dimensional and immediate.

Back to top

Job Descriptions and Role Clarity

A major issue in many family businesses is the concentration of almost all real power in the hands of a dominant / domineering owner / founder. Many of these businesses take a very casual approach to job titles, because their cultures are set by their leaders, who are so secure in their personal authority they see no need for formal titles to prove the point.

Unfortunately, this attitude often means that very little effective authority is delegated to other family members, or to trusted employees. As a result the business is heavily reliant on the decisions, and perhaps the whims, of their owners, which becomes increasingly problematic as:

  1. The business grows and becomes more complicated.
  2. Family members working in the business want to develop their own leadership skills, but receive little encouragement, and no indication of where any boundaries lie.
  3. Staff are unclear about what is expected of them and either just wait to be told what to do – or get so frustrated they leave.  Consequently the business can only retain staff who are compliant followers, rather than initiative takers.
  4. The owner ages and their decision making becomes less reliable.
  5. A succession process is required to ensure business continuity, but there’s no obvious, or even potential successor in sight, for reasons explained above.

Once the Organisational Structures have been reviewed and revised as required, along business functional lines, we facilitate the process of developing detailed job descriptions for whoever will fill the major roles in the business.

We’ve found that conventional HR job descriptions are usually too “concise” to be of much use in a family business context, where boundaries are typically more fluid (did I say “vague”?) than they’d be in non-family organisations. So our job descriptions contain full narrative descriptions of what’s to be done, and why, and how (expectations); and these action descriptors are closely linked to outcomes descriptors, along with clear measurement criteria (KPIs).

Then everything needs to be tied into a regular review process to ensure that commitments made are actually kept, and that personal performances are reasonably objectively measured, and exposed to appropriate levels of scrutiny.

Back to top

Policies and Procedures

Operating Policies formally document the ‘what, why, how and when’ of key business processes and activities.

On the creative side, they encourage serious thinking about how to improve business operations, and encourage buy-in to the improvement process.

On the practical side, they help to increase clarity and certainty about how things are supposed to be done to achieve maximum efficiency, productivity and profitability. They also support the practical enforcement of those intentions, thereby forming part of the basis for professional management discipline.

During the many transitions that take place during a professionalisation process, policies provide useful guidelines and benchmarks for stimulating improvement and facilitating responsible change.

Because all business operations are inherently complex, every business needs a broad spread of policies to cover all of their activities. At the same time nobody wants to drown in paperwork – policies should always be appropriate to the businesses they serve.

Pro-forma policies can be obtained from trade associations and straight off the internet. Some of these materials are excellent, and can be readily applied in many businesses. However, the actual human process the should underpin the development of policies is the major determinant of how well they’ll be applied and observed in real life, so we recommend a more participatory approach to their creation, drafting, adoption and implementation.

By the end of the professionalisation program your business will have many of its processes documented as policies. This will both ensure that you’re operating with modern and appropriate systems and will help your staff (both family and non-family) to know exactly what’s expected of them, under most circumstances.

Back to top

Knowledge and Skills

One of the main aims of the professionalisation process is to increase levels of capacity, competence and confidence amongst staff through a mixture of learning and doing.

We invariably find that the knowledge and skills most commonly required are in the “human skills” area, and are all about increasing personal and collective effectiveness and professionalism, mainly through better leadership, management and teamwork.

We’ve developed and provide tailored training, coaching and mentoring in the following areas:

  • Building and maintaining high performance cultures.
  • Communication skills.
  • Facilitation and meeting management.
  • Feedback processes.
  • Fundamental HR: job descriptions and KPIs. Roles and titles; authority and responsibility; performance measurement and accountability.
  • Leadership and People Management.
  • Mediation. Managing and resolving conflict.
  • Negotiation skills.
  • Problem solving and decision making.
  • Professionalism and business behaviours.
  • Sales skills.
  • Strategy and Business Planning.
  • Time management and prioritising.

Back to top