Beware Of The Bottomless Pit
The separation between family and business is weak, governance structures have not been established and there is a danger of the business and family falling into the bottomless pit.
I was asked to sit in on a regular monthly management meeting of a family business. The four brothers who owned the various businesses in the group were starting to consider the transition to the next generation. The senior management team was present, all non-family members, and 18 cousins along with the four brothers. Apparently, this was a regular meeting, and as the management team sought to work their way through the business agenda, the meeting was continually drawn left and right as family members raised personal issues and concerns. Very little progress was made on business matters at that meeting.
The Twelve Dangers — There are many dangers that the traveller must be wary of and keep a close eye out for. Not only must they avoid these dangers but be proactive in protecting against them.
Danger: 4/12 — Bottomless Pit
Most successful businesses had their start in the form of a family business and progressively grew through the sweat, sacrifice and hard work of that family. The business is part of the family, and the family is part of the business.
However, there comes a time in all family businesses that a separation must be created between family business and the business of the business. Not to do so will at some point restrict the growth opportunities and capital value of the business.
As the business grows and non-family members begin to join in the management of the business, it is important that family matters no longer be intertwined in the discussions of the ongoing direction, performance and management of the business. Also as the family gathers each week, as is often the norm in many cultures, it is important that matters of the business do not dominate the evening meals and that the relationship between family members is able to be built and strengthened.
There is a discipline that must be brought to the separation between the business of the family and the business of the business for both to grow strongly. Otherwise, the performance of the business and the unity and harmony of the family are likely to be at risk and certainly compromised.
If the family would like to discuss business matters, considered best in the context of a shareholders’ meeting, then it should be conducted as a formalised meeting (even when in informal settings) with an agenda, a chair, a set time limit and minutes.
Often the succession process is the catalyst for the formation of the right governance structure and the opportunity of succession should be taken to strengthen the governance structures of business and family.
Quote From A Traveller:
“Designated family member successor lacks the required expertise, seek outside recruit necessary to assist the successor” — From A Family Business in China*
*Travellers quotes are from ‘Succession Reset’ by Dr Richard Shrapnel PhD, published by Baker Tilly International, London. 2014.