Observations
If a Family Business is a more complicated beast to manage than an “ordinary” business, it follows that the Business Families that stand (by definition) behind each and every Family Business, are also more difficult to manage than “ordinary” families.
Policies document things that must be done within an organisation, or entity.
Procedures describe how to do those things. Policies and (applicable) procedures are usually combined in a single document, or are otherwise linked together.
Fundamentally, combining family with business makes no sense, because what makes a business great is diametrically opposed to what makes a great family. As a direct consequence of this fatal flaw, any lack of appropriate policies or procedures in the family, the business, or both, is a common cause of conflict in Family Business.
Of course, there are many great Family Businesses out there, with some fabulous stories of success. What have we learnt from these prosperous, peaceful, happy families? We’ve learnt that, without exception, they’ve worked hard to develop and implement appropriate policies and procedures – both in their businesses, and in their families.
Family Business policies and procedures are described as: relevant systems, created within, and enforced by appropriate structures, to encourage the development and use of the skills and processes necessary to enjoy having a profitable, sustainable, conflict-free business … and a happy family.
A system is a group of interrelated items that work together in a prescribed way to achieve a desired, or required, outcome. All complex organisms use systems to help them integrate the functions of their component parts to achieve efficiencies (eg: the organs of a body working in concert to keep the host alive).
Effective systems minimise the inefficiency, and the component clashes and conflicts, that inevitably occur when processes are ad hoc, require constant adjustment, and need frequent reinvention.
Ineffective, or worse: non-existent systems, are common causes of conflict in Family Business, and in Business Families. They’re an unerring reflection of unhealthy underlying cultures that include all the negative descriptors you can think of that lie on a spectrum spanning: “tyrannical”, to “lackadaisical”.
In the short to medium term, family members and loyal staff accept this state of affairs if they perceive that benefits outweigh negatives, or if blind loyalty, complacency, laziness or fear prevent them taking action.
But, over the long term, it just won’t do – children grow up and assert themselves; staff consider their options (and the good ones make their moves); cliques form in the family and in the business, and the balance of power shifts.
Family policies and procedures are built on an understanding, appreciation, and application of the family’s values, culture, relationship style and quality, and its (and individual family members’) past and present needs. They provide clarity about what’s to be done, and how to do it, and certainty about how the rules apply to individuals. Reference to clear and appropriate policies helps to resolve current conflicts, direct and manage the family’s future activities, and generally fosters harmony across generations.
Business policies and procedures build on business values, culture, operating style and corporate knowledge – helping businesses manage risk, achieve commercial objectivity, maintain profitability, and secure continuity, in their future operations.
Solutions
Appropriate policies and procedures help Business Families and Family Businesses avoid conflict. “Appropriate” means having: the right things, at the right time, in the right place … and doing it all in the right way. That requires similar and somewhat different approaches in the family and in business. The following list applies to both entities – similar activities, different flavours:
- Identify all important areas of current and planned activity. Prioritise the ones that require attention. Organise everything into a project program.
- Consider the practical, financial and relationship implications of doing things badly in each area of activity, including risk of damage, loss and conflict. Re-prioritise, as required.
- Address each issue through collaborative, focussed discussion, covering: (a) objectives to be achieved / problems to be solved; (b) information required; (c) information assessed; (d) options? (Note: this process often flushes festering problems and issues and helps get them resolved, and avoided, in the future).
- Working party develops draft policies, and supporting procedures. Present to approving bodies (Business Board, or Family Council).
- Approving bodies comment, and provisionally approve new policies and procedures.
- Present provisional policies to family and/or staff in the form of a training session / workshop, to get buy in and commitment. Request constructive comments. Modify policy if/as appropriate.
- Finalise, implement and enforce new policies and procedures, including suggestions made by the broader group.