Rules of Engagement

Observations

Most Family Businesses are private business.  This gives owner/leaders the legal and practical ability to do virtually whatever they like with the business, since they only have themselves to answer to.  Or do they?

Similarly, family leaders (Patriarchs and Matriarchs) can wield their authority over “junior” family members in ways that would make Genghis Khan blush.  They get away with it because they’re parents and elders who’ve controlled their children all their lives.  Over the years, personal authority may have been replaced by financial authority (oppression).

For some people, beyond the world of legal rights and practical abilities there lies a moral realm of responsibilities to other family members, to loyal employees and to the family’s reputation and legacy.

The tension between these two positions is a common cause of Family Business conflict.

Entrepreneurial founders are often driven, highly business-focussed individuals.  This can come with a tendency to be non-empathic towards the needs of others.  Many observe the Golden Rule of Family Business: “He who holds the gold, makes the rules”.

Either because they perceive they have complete control and authority, or because they’re willing to act that way, whether entitled to that power or not, many founders don’t feel any need to formalise plans, roles and responsibilities, titles, policies or procedures, within their businesses.

In contrast, most “normal” people prefer certainty to uncertainty, and status quo to change, even when that means staying with the pain they’re in, rather than taking a chance on uncertain change.  Their pain may need to become quite severe before a person is willing to undertake change.

Lack of clarity is a common cause of conflict, especially when it makes individuals feel disempowered, insecure or threatened.  Not an ideal business culture!  Combine this with the complexities introduced by Family Business dynamics and you have a formula for conflict, when the needs and interests of family members are promoted contrary to the needs and interests of the business, and/or of the people working in the business.

Solution

Develop formal, written, Rules of Engagement, including implementation & enforcement procedures, using an inclusive, educational process.  Working parties, and/or workshops, produce the best results.

As a critical component of the Family Business Best Practice framework, Rules of Engagement are created through targeted, calm, careful and objective consideration of things that could happen within the family, within the business, and between the two entities.

Nominees, volunteers, or the entire family team discuss and agree what should happen, before it happens, and capture whatever they agree as guidelines, rules, implementation processes, and enforcement provisions.  People learn, and make better decisions, when their thinking isn’t being skewed by emotions and stress.

Business Rules of Engagement are captured in Business Policies and Procedures.  These include any and everything from Boards Charters, to Business Case proposals, to detailed HR Policies.

Family Rules of Engagement include a values framework, rules for family members wanting to work in the business, mutual obligations between family members (eg: all adults must have personal financial plans, wills and estate plans, binding financial agreements between couples, and appropriate insurances).

Once they reach a reasonable level of sophistication, Family Rules may be captured and codified in a Family Constitution, and perhaps in a complementary Charter of Mutual Obligations.

The Family’s Rules must be congruent with the Business’s Rules, especially as regards employment of family members.

The Rules should be discussed, modified and reconfirmed on a regular basis, preferably at Family Council and Family Forum meetings.  This provides excellent opportunities to educate, align and strengthen the family team, to help build the family’s long-term legacy plans.

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