Central to the operation of any business is bringing the management team together to work on the business. However, what would your response be to the following question regarding meetings in your family business:
On a scale of 1 to 10, rate the value the meeting adds to the business? In what ways does it add value?
"Zero” (Response from a family member when in meetings with his sibling and parents)
What we often see is the ‘one in, all in’ situation. All the family members coming together to have their say on everything… and I mean everything. The ‘attitude’ of the front reception person; why cousin Steve should be employed in the business; the purchase of a new commercial building; the date and location of grandma’s 90th birthday; and the declining trend in monthly profits.
“Our family board meetings run for about 5 hours. There is a lot of information but little discussion, debate and decision making” (Response from a family member in board meetings involving 10 family members)
In frustration to the situation, some family businesses adopt the ‘us and them’ approach. Only family members actively working day to day in the family business meet to make decisions on the future of the business.
But what about those family members who are shareholders but not working in the business? Should they be privy to what is happening and having a say in the future?
This is where structure is an important element to success. Structure ensures the ‘right’ people come together in the ‘right’ forum to discuss the ‘right’ things, at the ‘right’ time.
What is structure?
It is a combination of:
• The right composition of attendees – the people who should be at the table making decisions regarding the business are those who have been charged by their stakeholders (if a board meeting, they are voted by the shareholders, if a management meeting, those appointed by the board and CEO). Having the wrong composition of people at the table will destine the meeting to failure.
• Regular meetings with a clear purpose and agenda – in the family business we often help families establish two meetings with clearly different purposes. One being the business advisory/board meetings which focuses exclusively on the business issues and decision making. The second is a Family Council meeting which focuses on family issues that relate to the family business.
• Fewer family members with a seat at the table – in the context of the business advisory/board meeting, those family members with the appropriate skills, experience and insights discussing and making business decisions in the best interests of the family business, and ultimately for the wider family. Similarly for the Family Council, the mix of family members who represent and make decisions in the best interests of the whole family, not just family shareholders.
• Tools and rules – these are important for any formal gathering of people to: direct the discussion; set the boundaries (or guideposts) in terms of what topics are discussed and what decisions can be made; and outline how contentious issues or scenarios will be resolved. In terms of a family business these take the form of Family Rules (or often referred to as a Family Agreement or Family Charter).
• Leadership – to set a positive tone and ensure the meetings are focused and remain ‘on topic’. Often this leadership comes from a non-family member until the family becomes familiar with the new structure and meeting behaviours.
In our experience, most families need support to make the distinction between the role of the Family Council and the Business Board of Directors – for many families these bodies have always been ‘one and the same’. Once the family understands the distinction and embraces the new structure they benefit from a non-family member chairing the meetings so they run smoothly and the family can focus on new behaviours and new conversations.
How receptive would your family be to an independent and objective non-family member chairing your family meetings?
Another challenge on a daily level is family members understanding which hat to wear and when to wear it. Some family members may have multiple roles in the family business or businesses (i.e. they wear multiple hats). These family members have the added challenge of recognising which ‘hat’ to wear in different conversations and making decisions.
“My daughter now runs the day-to-day business and I talk to her every day. I need to stop and think before the conversation: am I offering advice as a father or am I talking to her as a shareholder”. (Comment from a first-generation family member).
”The trick is to structure and frame the conversation/communication before going into it. Now thinking about you… ask yourself before the next conversation:
• Is it a family topic or an ownership topic or a business topic?
• Should I be making the decision as a family member; an owner of the asset; or an employee/director of the business?
If family members individually and collectively exhibit effective communication and embrace structure then the family is well on the way to good family governance.
Are your family meetings a ‘one in, all in’, an ‘us and them’ or a clear structure which all family members understand and observe?
Article first published by Bill Noye – KPMG Partner Enterprise, Australian Practice.
