22 Feb Family + Business: It’s All a Matter of Balance
It has been suggested that many family business problems stem from the inherent conflict between the distinct, yet overlapping parts of the family business system. Each part of the family business system – business, family and ownership – has a distinct set of needs, goals and structures. Some family businesses respond to this challenge by ignoring the emotional family components, while others disregard rational business processes in favor of family interests. In our experience, the most successful family businesses are those who develop a balanced approach to family and business.
Professionalization is one tool that can help family businesses maintain this balance. By “professionalization,” we mean adding professional business practices and structures. Some examples might include developing a more organized approach to family communication. Or developing policies related to family employment and compensation. Or putting a buy-sell agreement in place. These and similar activities can initiate discussions about family and business interests, helping to balance the two.
Formal strategic planning is another tool for balancing business and family priorities. Strategic planning involves external and internal analysis of the family business. It causes the organization to look outside its customary way of conducting business. It can help preserve family traditions, while creating new vision and direction for the future. It can bring together family and non-family members. All of this helps to clarify priorities and promote the sharing of perspectives on business and family issues.
Outside perspectives also are critical to maintaining family business balance. Whether through a formal board of directors or the informal use of professional advisors, “outsiders” serve as an important sounding board. Those standing outside the family business can lend fresh perspectives and challenge conventional practices. They can help address controversial issues that the family may have had trouble discussing. An outside perspective is often crucial to managing the interaction of business and family.
No one formula can ensure the success of a family business. However, using a professional, strategic approach, and incorporating outside perspectives, will improve the chances for managing family and business.