Relationships

Relationships

How do you manage family relationships when a family owns a business?

Carefully! There are multiple family relationships which add an extra layer of complexity onto a business: owner / spouse; owner / children; spouse / children; siblings, cousins, family members in the business / family members outside the business, in laws on all generation levels. The larger the family and the larger the business, the larger potential issues there are.

That sounds daunting. Why own a family business at all?

Family businesses provide a good opportunity for wealth creation. Beyond that, studies have shown that family businesses at their best make a great contribution to society. They foster family cohesion and pride, they tend to act ethically because of the family reputation, they often have very loyal employees because they treat their employees as family, and they are generally very active in their communities.

But that's family businesses at their best. What about the rest of us?

Even the best family businesses work hard at relationship building. An understanding of what the company's mission is, what its short-term goals are, and solid job descriptions are a start. Family business members must know their boundaries. Good, open communications fostered by the CEO can help to build good relationships throughout the firm.

What about family history?

Family members in family businesses wear different hats, often at the same time. How does a CEO distinguish between the role of CEO in the business and his or her long-time role as mother or father when dealing with the younger generation in the business? The same question goes for the younger generation. Do they expect special treatment because they wear son or daughter hats? How do siblings in the business put aside memories of long-ago wounds or slights and put on their business hats in the best interests of the company and the family? These are not easy issues to deal with, but it's essential that all members of a family be aware of them.

How do you deal with these deep-seated issues?

If such relationship issues are an impediment to the smooth functioning of the business, they must be dealt with. Many families have relied on family-business counselors, coaches, and psychologists to help them through. Lists of such professional people can usually be found through college and university family business programs.

What is a buy-sell agreement?

If ownership of a family business is shared by two or more partners, a buy-sell agreement sets forth in detail the provisions for one or more partners to sever their relationship with the company. To whom may the departing partner sell his or her shares, and under what conditions? Buy-sell agreements are necessary for all partnerships, including siblings who may inherit the company from their parents. Lack of such an agreement can result in unintended distribution of ownership to non-family members, dilute the family ownership, and cause chaos in the family and the business.