Running a family business comes with its own unique set of advantages and disadvantages.
Family-operated businesses can benefit from a level of commitment and passion that is rarely achieved by employees with no ownership in the business. However, working with family members often leads to informality and a lack of operational structure; which, in turn, can cause ineffectiveness and conflict.
Toohey Reid works with many family businesses and understands the importance of implementing a formal management structure. Too often we will see a successful family business start to struggle with the growing pains caused by a lack of formality in the management structure. For example, the brother who enters into deals or engages service providers for the business without consulting the rest of the family. Or the sisters who disagree about whose responsibility it is to complete certain tasks.
Latent personal issues between family members can also sometimes get in the way of the commerciality of a business decision. When spouses are added into the mix, this can often inflame these types of issues.
The following strategies can be implemented to combat these types of issues:
1. Formal, regular meetings
A family-operated business needs to be treated as such: a business. Family business owners should avoid discussing business issues or decisions at the family barbeque. Family businesses should schedule quarterly (or more regular) meetings and set agendas for those meetings. At the meetings, tasks should be allocated with deadlines to create accountability and maximise productivity. Aside from addressing the short-term operational aspects of the business, these meetings can ensure everyone is aware of, and aligned with, the overall direction and core values of the business.
2. Role delegation
Family businesses should avoid unintentional role delegation. This produces confusion around who is responsible for doing what and conflict about the chain of authority. Family members should have clearly-defined roles that reflect their qualifications, experience and interests. This will avoid conflict and ensure everyone is on the same page about how the business operates.
3. Independent advisors
Publicly-listed companies appoint external advisors, such as accountants and lawyers, on their boards of directors. There is no reason why a privately-owned family business should not also adopt this practice, or at the very least, engage an external advisor for ad hoc advice and input. An external advisor can provide a fresh perspective and act as a neutral sounding board for business decisions.
Contact us today if you would like to discuss how your family business can implement the above steps!
GENERAL ADVICE DISCLAIMER:
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
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