Well, it seems that yesterday’s blog hit some home truths, that Mexican saying, “Padre noble, hijo rico, nieto pobre” – which means “Father, founder of the company, Son rich, and Grandson poor” certainly attracted some attention and from some of the comments and emails I’ve had, the realities and challenges of a family business are definitely alive and of some concern.
Let’s take a few of the points raised in the yesterday’s blog that created the most comment and not only see why but also offer some suggestions to solve the issues.
Succession Planning. In any business venture, the importance of succession planning (often called an exit strategy) cannot be understated. The very fact that members of the family discuss and agree as early as possible the way that the business will move from current owners to the next generation, the more certainty is created in not only the minds of all involved but in the business itself. 
If there is no succession planning process, how will the company develop and nurture its human resources? How will you assure a continuing sequence of qualified people to move up and take over when the current generation of managers and key people retire or move on? How will you be able to plan for the future of the company without some assurance that the key posts will be filled with family members able to carry on and excel? Succession planning is much more important than the time many companies devote to it would indicate.
- Employment Function. When recruiting, selecting and hiring, naturally you always pick the smartest person you can find. However, there are many instances in a family business, where those who feel they “deserve a job” (whether they be a share holder or not) shouldn’t have a job. And if they have a job, what roles should they play. Individuals in all industries perform the best at what they like doing best. Determining what they are best at is often a matter of discussion between shareholders and key people within the business. However, if no agreement can be reached, one option is to create a performance based salary package, where either a small or large portion of the designated income is calculated against key performance indexes (KPI’s). This normally has the effect of either creating a true roll for a family member that allows them to perform at their best and therefore produce well for the company, or the individual concerned realises there is no place for them within the company. It must be said that owners in a situation like this have to be strong and resolute from the outset if this is the chosen course of action
- Written Strategy. In today’s world, a family business must document their aims, their strategy and their personal requirements – a business plan if you wish, and this must be done each year and reviewed during the year, as many times as you feel comfortable doing so. The very fact that there is something physical to relate back to (rather than a faded or distorted memory) ensures that the path the business owners have chosen is maintained. Putting together a business plan allows you to stroll through many aspects of your business future and helps you to have ready answers when needed. It does provide the owners with a road map whether it be your vision statement, how you want to expand or improve, your opposition, and the market. Don’t fall into the trap that many businesses do, which is to write a business plan a week before they need to approach the bank for funds, you need to have it on the shelf 24/7.
As I wrote yesterday, our industry is in the main, made up of many small family owned businesses, we are quintessentially a cottage industry, understanding the traps that can befall a family business and doing something proactive about it will assist you greatly today – and probably help the kids down the track too.
