Here’s what’s new from Prometis Partners:
Our topic for the month of April 2019 has been understanding family roles and responsibilities. Establishing these roles affects both how successfully your business runs now and how easy it will be to transition to the next generation.
Family Roles and Responsibilities
A backbone of the American economy is the family business. A family business, when run well and by family members who are dedicated to it and to the family’s mutual values and goals, can be a powerhouse of activity and success. Conversely, if family roles and responsibilities are not understood and communicated to all family members, this kind of business can falter quickly. It’s also one of the hardest types to transition when key leadership retires or otherwise moves on.
Why can a family business be more vulnerable than companies that are single owner or partnerships? It’s because the relationships between the owners are more complex and because family members often fill more than one role in the company in order to keep it running. If leadership overlaps and family roles and responsibilities are not clear to everyone, dissention or even out-and-out fighting is more likely to occur because the people involved know each other very well. They know each other’s weaknesses and aren’t afraid to attack them.
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Exit Coach Radio Podcast
In this podcast Vincent talks about what happens when a family has different types of roles – and active and non-active shareholders – involved in the family business. He also discusses how important it is that the current generation of owners mentor the next generation and what they must do in order to prepare them to take the reins of the company someday.
What is your company doing to mentor and educate the next generation of leadership? Do your children have the practical business skills they will need to succeed? Can they read a business statement? Manage employees? Have they ever been to a shareholder meeting or a business workshop? Now is the time to be teaching these important skills and educating them about how a business really runs and how to manage it.
Click here to listen.
How Does Defining Family Roles and Responsibilities Help Prevent Problems?
First, establishing the expectations of each owner and family member towards the family business will eliminate needless emotional arguments about what is “fair” or what any specific family member should be doing. If it’s clear what everyone’s role is and everyone knows what those roles are, when argument arise, they can point to that understanding and measure behavior against it in a more objective way.
Second, those defined roles give someone the authority to step in and make decisions when there is disagreement. It’s better, of course, if everyone agrees about the company’s mission and goals, but things change over time. Sometimes family members want to leave the company or sell their shares. If the company has decided what it will do when these shake ups occur, these crises can be handled much more efficiently and without unnecessary drama. If everyone in the company knows and agrees that a certain person or certain people have the last word, that means disagreements can be solved more quickly and easily.
If you have a combination of shareholders who are active and those who are inactive in the family business, that can also create tension especially if some are more interested in their dividends than the growth or development of the business. Families who are committed to creating policies and procedures and establishing authority and abiding by it will be better able to weather problems in the business and in the family.
Defining family roles and responsibilities helps everyone in the family understand what their expectations are and helps the business perform at its highest level.
Prometis Partners would be happy to talk to you about the challenges your company is experiencing with family roles as well as any transitional planning you have in mind for your business. Preparing the next generation of your family to take over key roles and responsibilities in your company is a process that can take years, so please allow for the time before you are ready to retire or move on.