Statistics show that approximately 35% of Fortune 500 companies are family-controlled. At some point, these were all small start-up enterprises who kept it in the family while getting things off the ground.
But at some point those mum-and-dad ventures must take on a more professional face, presenting themselves as competition for the big guys. This can be a tough balance to maintain.
There is a correlation between the continuing success of a family business and the extent to which the leaders enforce a high standard of professionalism.
It seems in a family business there are five areas in which these standards must shine through:
- Developing a vision and strategy for the business
- Defining the governance of the business
- Shareholder compensation and equity
- Organising the management practices of the business
- Managing succession issues
Define firstly how decisions will be made. Is there a chain of command or will you create an advisory board? Who will sit on the board? How will outside advisors come into play?
Asking these tough questions from the start will dictate how crises are handled. Formalise the decisions in a document for easier referral.
Develop a clear strategy for compensation. Compensation should be based on market conditions in order to keep family and non-family members satisfied.
Make sure that duties and responsibilities are delegated with clarity. There must be clear lines where family ends and business begins. It isn't a case of "doing it my way this time because we did it your way last time".
Consider the four D's (death, divorce, disability and disillusionment) that may most affect a family-run company. Develop clear policies that apply to all team members regardless of whether or not they are kin.
Developing sound management practices is vital. The family nature of the business can affect the non-family members in a negative (or positive) way. Be sure to include dispute resolution strategies.
Incorporate sound performance appraisal systems to ensure morale remains high, the culture is balanced and that a sense of community is formed.
Be clear from the start: are you a FAMILY business or a family BUSINESS?