If your family is in business together, you already know some of the special joys — and challenges – of working with relatives. A family-owned business can be a great vehicle for generating family wealth, for providing jobs for family members and the opportunity to work together.
While the rewards can be great, the potential for problems increases as the business and the family grow. Unresolved conflicts, lack of trust, difficult family relationships, or family demands on the business can all contribute to family and business problems.
Families who plan ahead and communicate openly about family and business issues tend to see better outcomes, in terms of both family unity and business performance, than those who don’t.
In their book, Strategic Planning for the Family Business, Randel Carlock and John Ward challenge business families to identify plans and policies to address five pivotal variables, each beginning with the letter C, in order to effectively balance family demands with the requirements of the business.
The first variable is control. This is about establishing, in a fair-minded way, how the family will address decision making in the family, in management, and in ownership of the business.
The second is careers. How will you make it possible for various family members to pursue rewarding careers or other roles in the business with advancement and rewards based on performance? And what about those who prefer to work elsewhere? While you probably do want family members to feel welcome to join the business, you probably do not want them feeling pressured to do so.
The third variable is capital. This concerns the systems and agreements you might create so that family members can reinvest and, if necessary, harvest or sell their shares without damage to other family members’ interests.
The fourth variable is conflict. Proactive business families assume that there will be conflict, and they plan and commit in advance—before they’re in the heat of battle—to the methods they will use to work through such challenges.
And finally, there’s culture. Every business has a culture, whether that happens by design or by default. Gaining clarity on how the family’s values will be enacted in the business culture can be a critical element in defining and building your legacy.
It’s not easy raising a healthy family – or running a successful business. Giving proper attention to the Five C’s – control, careers, capital, conflict, and culture – can keep your business family on solid footing.