How the family Governs the family Business

We left off last week’s blog talking about some of the family members who are not employed in the family business, but whose lives are nonetheless affected by the business, as part of the general theme about how the family governs a family business.

Today we will use the airplane analogy to talk about how they can influence the business, as well as the responsibilities that come along with the benefits. We mentioned a few of the different generic players who might be involved:

– Alan/Alice (G2 child who is not employed),
– Betty/Ben (G2 in-law), and
– Chris (G3 potential future employee).

The day-to-day business is run by the employees, and the employees are usually managed by the senior executive(s) of the company. If there is a board of directors, the board appoints these executives.

Somewhere in that framework, there will be some sort of strategic plan that guides the company from month-to-month, quarter-to-quarter, and year-to-year. So what about the family? Let’s go to the airplane analogy.

The company is the airplane. It would seem crazy to simply allow Alan/Alice to decide that they wanted to fly the plane one day, by simple virtue of the fact that they are the child of the founder.

Similarly, if Betty/Ben were to insist that their family wanted to use the plane for a month for a long-dreamed-about trip around the world, this idea would be rejected.

And if Chris is thinking “It sure would be cool if I could borrow Grandpa’s plane to bring my buddies to Cancun for spring break”, this is probably not something that should be seriously considered.

But airplanes can be used in many different businesses. FedEx uses them to deliver packages, Doctors Without Borders uses them to fly to underserved countries to provide much needed medical services, and organized crime uses planes to move illegal drugs around from country to country.

What business is the family in? What business does the family want to be in? What business is the family good at? What business can the family be proud to be in? All of these questions are family questions.

When Grandpa started the company, these were not questions that were pondered. If, however, the family business is going to last more than a generation or two, these questions become crucial.

In order for the family to be involved in the answers to these questions, there needs to be some form of governance structure. How are decisions made? Who gets to have a say? How do we communicate? These are all really important questions that are part of transitioning from Grandpa’s start-up to the legacy, multi-generation company.

This is hard work, and when you think about it, not every company will have what it takes, and not every family will have what it takes, to make it happen.

While Alan/Alice, Betty/Ben, and Chris will rightly feel like part of the family and therefore part of the business, the benefits of ownership, if they are to enjoy them, come along with responsibilities as well.

The most common form of governance for the family is a sort of “Family Council”, which will represent the family’s interests regarding such questions as “what do we want to use our airplane for?” After all, it might have their name on it.

But for their say to be taken seriously, they must work together, in a formal way, to have their voice heard. And while initially Grandpa may have a hard time accepting that others want a say, the family’s best hope of being taken seriously is to work together, within a structure, as the family’s voice.

Steve Legler “gets” business families.
He understands the issues that families face, as well as how each family member sees things from their own viewpoint.
He specializes in helping business families navigate the difficult areas where the family and the business overlap, by listening to each person’s concerns and ideas.  He then helps the family work together to bridge gaps by building common goals, based on their shared values and vision.
His background in family business, his experience running his own family office, along with his education and training in coaching, facilitation, and mediation, make him uniquely suited to the role of advising business families and families of wealth.
He is the author of Shift your Family Business (2014), he received his MBA from the Richard  Ivey School of Business (UWO, 1991), is a CFA Charterholder (CFA Institute, 2002), a Family Enterprise Advisor (IFEA 2014), and has received the ACFBA and CFWA accreditations (Family Firm Institute 2014-2015).
He prides himself on his ability to help families create the harmony they need to support the legacy they want. To learn how, start by signing up for his monthly newsletter and weekly blogs here.