In any organisation, the person who is responsible for the result also must have a stake in achieving the outcome, which means that there ought to be a consequence – positive or negative – based on whether the outcome is achieved. Founder –entrepreneurs still in the family business usually balk at the concept of accountability for their own actions.  After all, they built the business on gut instinct and hard work, and as far as they are concerned, their track record speaks for itself.  They are trail blazing lead cowboys in a movie that they write, produce, direct and headline.  There may have been multiple takes and more than a few failed reels, but they eventually get a box office hit and that is all that counts.  However, when they introduce their children into the business, they begin to lament about work ethic, lack of responsibility and the need for accountability.

Would that they had set up relevant systems long before their sons and daughters entered the business. Precedents would have been set, protocols would be in place and the next generation would have seen their parents modelling the behaviour that they now demand.  In vain, I have advised start-ups to put in at least an advisory Board and/or produce plans and budgets for which they will answer, not just submit to the bank, and ignore thereafter.  I hear all the reasons: “I am too busy building the business” or “If I divulge my ideas, someone with steal them” or “People do not understand what I am doing here” or “The business is too fledgling to put in all those systems”.

A generation later, FBs struggle with holding family members’ feet to the fire for their performance on the job. The children have often been reared in a culture of entitlement. As far as they are concerned, the business is there to provide them with jobs, a lifestyle in which they were raised, and an expectation that as future or current owners, they can do whatever they want. Some of these businesses have elaborate performance appraisal systems. Such systems may evolve from a culture of accountability; they do not of themselves create that environment.  Accountability is about clearly defining responsibilities, holding relevant people responsible, evaluating their execution and applying consequences. If you skip a step, you lose authority, moral or otherwise. Accountability is about roles and rules.

In FBs where roles are so easily collapsed, a father finds it so difficult to behave like only the boss when dealing with his daughter in the business. Parental compassion and judgment come into play and I have never met a truly objective parent. You may fire a child from the business but not from the family or your heart.  The aim though is not to set up a dynamic where things go unchecked for so long that it comes to the firing of a next generation member. It is very difficult for families to weather that storm and besides, it is seldom done. Instead, bickering or worse yet, whispering, among family members persists and the business suffers.  FBs need to work on setting clear goals, delineating family member employment and evaluation policies, putting in family governance structures, developing their next generation to be responsible owners from the cradle, and putting in systems that allow for both monitoring and bi-lateral communication.

If an owning family collectively decides on its risk tolerance and regularly scrutinizes the pertinent accounting ratios, then the responsibility is theirs if things go astray, not the unsupervised CEO or CFO, family member or not.  The family must be held accountable for being responsible owners. If there are clear rules for family member employment, including career paths and appraisals that include more than Dad sounding off, then the next generation member is more likely to rise to the occasion or realize and work on improving his own limitations. In my experience, FBs which think that they will apply the identical approach to family and non-family members are frankly delusional. It just will not happen. It is far better to acknowledge this and implement the special systems for family members. I am not in the least suggesting that this means a free pass for family members. If anything, it is just the opposite but I prefer not to think in these terms. I view the right family members in the business as innately adding value.  We just need to introduce them to the business properly, coach them incessantly, evaluate them regularly, reward them appropriately and yes, hold them to strict standards.

Accountability does not end with those who work in the FB. Family members who work outside of the business but are potential or actual owners are also standard bearers for the business.  I often get resistance when I encourage families to introduce a Code of Conduct to apply to active and passive shareholders. Those who do not work in the business view this as intrusive.  Responsible ownership is measurable and needs to be monitored as well.  Family members cannot expect to share in the financial and non-financial largesse that comes with ownership and not answer for their behaviour.  Each person has a responsibility to the family business and must act accordingly.

Often in FBs, we focus only on the positive outcomes and sweep the risky or irresponsible behaviour under the carpet.  Confrontation is to be avoided at all costs or else family harmony is disrupted and who wants to deal with that?   The problem occurs when someone trips over the hump in the carpet, breaks his nose and then everyone is mopping up blood.  It is far better to embrace accountability from the outset and work on those governance mechanisms that make it easier to implement.