As both the owning family and the business expand, family businesses face decisions about inclusivity. Within the business, the growth is fueled and supported by the hiring of professionals to bring the skills that are needed for growth. More likely than not, existing family member employees do not have the broad range of talents. Additionally, often there are just not enough and/or competent family members available to fit the bill and the business can hardly wait for another generation to grow up. Thankfully, the business expansion is outstripping family growth.
Shrinking Family Sizes
Besides which, family sizes are shrinking the world over. I am seeing families where the number of grandchildren is less than the number of children with no chance of even equalizing the numbers. This means that there is a reduced likelihood of total family management control of the business. The professional non-family managers expect to have access to all information in the business and the autonomy to make and execute decisions. For closely and tightly held family businesses, especially in the first two generations, this is an issue. They initially try to run the business and control the flow of information on a “need to know” basis, often not allowing any one-person access to all the information.
The family business owners find any number of ways to justify this position and often compensate by treating the non-family manager “like family” which may translate into any number and description of special perks. He or she will supply information and analysis on any issue but meets a closed door when it comes to crunch time. Any professional manager worth his salt will find this unpalatable and look to make tracks out of there. There is no way around this– if you want the best people to work for you, you cannot shut them out of any inner sanctum decision making. Swallow hard and share the pertinent information with all the relevant people, and then some. Transparency encourages commitment among family and non-family members of the business.
Board Room Entry
The next big embrace within the business is independent directors on the Board. An independent director does not refer to the company lawyer or accountant or consultant, as necessary and useful as these professionals are.. Family Businesses need to open those Board room doors to people who do not stand to gain or lose income by any advice they offer. This is a much harder sell then empowering employees. Business owners reason that the employees are usually well known to the family and besides which, they rely on the business for their livelihood so they are more likely to act as per the wishes of the owners.
Additionally, employee empowerment is about individual tactical decisions, not about strategy and direction. That must remain in the purvey of the family, they say, because no-one else can understand the operations of the business or its history or its culture or the family dynamics and traditions or whatever else they cite as good reasons to keep the business of the business within the family. And they are quick with rejoinders about the ineffectiveness of boards of public companies because management disguised or hid pertinent information. And while there is some validity in all of these opinions, the benefits far outweigh the perceived costs. If done properly, the inclusion of the right independent directors on a family business board is a gift to the business and the family. It will contribute to the success and longevity of the business.
The Outlaw Syndrome
The growth of the family by marriage provides yet another opportunity for Family Businesses to consider more inclusivity. And it is one that keeps the senior generation awake at night. The advent of a child’s spouse cannot be treated as admission only– a ticket to enter the family but with no additional privileges in the family business. This is not about in-laws working in the business, although that is part of it. It is about having the in-laws privy to what the business is all about, including profitability dividend policy, planned share distribution. Yet too many of the senior generation want to dole out minimal access to features of the business that directly influence the in-laws’ lives.
They welcome them into their homes but treat them as outlaws regarding the family business. Yes, guarding one’s privacy is critical and yet there is a thin line between that and exclusionary behaviour. The latter will not endear the in-law to the family and could create more problems than it is worth for the family member spouse and the extended family. Sharing relevant information can be done in an appropriate manner and setting. It is actually a better approach than relying on any code of secrecy that cannot withstand the intimacy of pillow talk.
No Stamp Required
Family businesses often thrive after the admission of next generation family members and in most cases this ensures the survival of the business. While the in-laws, independent board members and spouses may face admission with limits, the next generation members are told that their blood lineage entitles them to total admission. The family’s children are expected and encouraged to enter the business and believe that they have a clear path to the stage.
They have unlimited access to all the food and alcohol bars along the way, regardless of food allergies or addiction issues. However, admission should not be all inclusive without some kind of screening. At the very least, there must be no automatic progression to the top of the line or unlimited gorging at every booth.