Continuing to struggle with transitioning his family business to the next generation, Big Daddy Ernest Bux, 65, considers perhaps the most difficult task on his checklist: Ensuring that both his management succession decision makers and all of his ownership succession members are good communicators of both business and family issues. A couple of months ago, Big Daddy Bux addressed the family factor and its two components – the management succession process and the ownership succession process. Now that the management successors (the business decision makers) and the ownership successors are identified, how can Big Daddy equip them both to be good communicators?
While recognizing that there will necessarily be some overlap, both succession groups require their own tools and a process for effective communication. The successor managers will attend family business meetings focusing on the business itself. Successor owners will attend family council meetings allowing all the family (direct and indirect, active and non-active family members) to learn more about the family business and to tactfully express their views both on family issues that impact the business as well as business issues that impact the family.
Family Business Meetings
Family business meetings provide the family members active within the business a dedicated forum to discuss family and business issues pertaining to and implementing Big Daddy’s – and, later, their own (with input from the family council) – succession and strategic plan. Even if the same players are involved, family business meetings do not replace regular business/management meetings or meetings of the board of directors, which certainly may include non-family members in management roles.
The family business meeting agenda will address the interaction between the family and the business (the family component) as it relates to the management and ownership succession. For example, how does ownership and management succession change upon divorce, death, birth or adoption of children, or bankruptcy of an owner? It could also include decision making on the business tactics to be implemented in order to achieve the strategic vision set forth by the family council.
At least initially (and perhaps longer), consider having a non-family member facilitate these meetings. The facilitator will be responsible for: selecting the meeting time and place; establishing a fixed schedule date for the first several meetings; holding them on a regular basis (not less than quarterly even if there is nothing new to discuss); and ensuring that the family business members stick to the agenda.
All should be given equal opportunity to participate in the discussions. If an issue becomes too emotional, the facilitator can park the discussion on that issue until another meeting so that the primary meeting may continue. Emotional issues are inevitable; allowing a non-family member facilitator to handle them helps to avoid jeopardizing the effectiveness of future meetings.
Family Council Meetings
Utilizing their value to the fullest, Big Daddy Bux should have initiated family council meetings years ago, initially chaired by Big Daddy and Angelica and attended by their children, perhaps expanding along the way on occasion to include spouses, in-laws, grandparents and grandchildren, whether active or non-active in the family business. For purposes of this generational business transition, the family council meeting would typically be held annually (perhaps in conjunction with a family retreat) or every couple of years unless the business or the parents are in succession/transfer mode, when these meetings may be required more frequently. Depending upon the size of the family and the age of its members, the successor owners might assign (and periodically rotate) an active family member to be the meeting coordinator or chair. As to what gets discussed at the family council meetings (probably after several family business meetings), prime topics are “big picture” information – not for decision-making, day-to-day business issues or business management succession issues – the long term strategic plan and vision both for the business and the family. The first family council agenda might include:
- the purpose of the family council and rules;
- overview of its role and how it is different from family business meetings;
- overview of how the business is performing and the business plan – near and long-term;
- overview of current management and succession ownership thinking;
- possible education, employment and career opportunities for family members;
- possible community and family philanthropic activities for both family members and the business;
- consideration of the family business performance and objectives in keeping with the overall family council objectives; and
- brief evaluation of the meeting by each of the participants.
As Big Daddy and Angelica age, the family council meeting can also provide an essential forum for the children, Big Daddy and Angelica to discuss their parents’ changing physical, emotional and social (and sometimes financial) needs. [More on this in another article]
Absent Big Daddy’s strong urging, both the family business meetings and the family council meetings require a catalyst – something to get them going. Whether instigated by the current owner or some family catastrophe, start small – yet intentionally. To set the tone, identify a joint purpose, establish some meeting rules (starting with civil communications and boundaries) and develop a comfort zone promoting the meetings to continue and permitting the group to be expanded to all active family members.
The overriding objective? Communication with and among all management decision makers, the ownership successors and their families. And, hopefully reaching a consensus, more often than not, with each. Customize the agenda to suit your family. Each family business – and their family members and dynamics – is different, yet the succession issues facing family businesses tend to be fairly common. The differences are timing, the players and the circumstances in which the family and the family business finds itself when these issues arise.
Whether the family interactions in the family business meeting and the family council meeting are governed by agreed-upon rules set at the initial meeting or governed by a company agreement, there must be boundaries. While most families prefer not to consider that a family member would “go-legal” on them, having a formalized and working company agreement that provides a backstop to use “Robert’s Rules of Order”, if necessary, is essential.
Of course the best result is for both the family business and the family council meetings, as agreeably and consensually as possible, to set their own purpose, roles and rules – and look to the company agreement only as a resolution option of last resort.
Tilting the Scales – Weighing in for the Family
Decisions in a family business are made in the context of not just the business, but of the family relationships. Families are complex, emotional systems, so what can seem like straightforward business decisions are deeply affected by the history of the family relationships and the health or complexity of those relationships. That’s what makes it so complicated. That’s why deliberate, thoughtful and effective communication is key.
Overwhelming to Big Daddy? Maybe at first thought. The central theme is still constructive communication with an aspiration for consensus. The more Big Daddy communicates to his family and they interact with him – civilly – the more likely it is for the family to reach consensus.
The plan outlined above can be collapsed or expanded – depending upon where Big Daddy, Angelica and their family members are in the process. There may be a fully functioning and indispensable board of directors or executive committee, meetings of selected family members, and family council meetings of all the family members. Or, there may be just Big Daddy, Angelica, their three children and their spouses. Even then, Big Daddy and Angelica would be well advised to think separately about each of the issues identified above – (i) running the business today; (ii) family actively running the business who are identified as being the successor managers; (iii) successor owners who may or may not be part of the business management team; and (iv) issues affecting how both management succession and ownership succession will change and transition over time.
This Reminds Me of a Quotable Quote
Do you remember? “What we’ve got here is failure to communicate” from Cool Hand Luke (1967) – The Captain’s Speech
Family Business Resources
As I represent families in generational transition and their businesses, I work with Gray Reed’s robust family business/family office team to get a transitioning family business on the path of healthy business and family relationships. Or, when one or more of these business or estates shows signs of distress and cracking, to mend or to pick up the pieces when family tensions erupt into a full-fledged fight.