MANY assume that family run businesses are an ideal to aspire to. Maybe, but they do have many problems of their own, not least of which is internal strife. In this, the second part of this feature, I looks at how to tackle family conflicts in the business.
Conflict can be minimised or resolved only if the family wants to solve key problems. One response to preventing conflict used to be to make the eldest sibling the boss, an approach that only works for the long term when that individual has the wisdom of Solomon.
In reality, prevention involves good communications, for instance through a family forum or council, combined, perhaps, with a family constitution. This may even mean family members taking a communications course to persuade them to listen, ask for and give feedback, organise thoughts before speaking and practise both give and take.
There are at least four reasons for setting up a family council:
I To educate family members about their rights and responsibilities within the business I To clarify the borders between business and family and to allow all members, including
those at junior levels in the business or those outside it, such as spouses, to air their views. In this way, family issues can have their proper weight but no more. Most importantly, their influence and impact can be understood by the decision makers.
I To separate business matters from other family matters: too many firms put business on the agenda when they get together for Christmas or birthdays.
I To generate a shared vision and guide and discuss its development.
If the council is to be effective, all family members must know that it is convened on neutral territory and that they are expected to speak their minds freely and honestly. The family should be defined in the broadest sense as those who work in or have shares in the business, as well as those who manage it.
The business's leaders should listen to ever yone and give ever yone a voice. After all, even those who play no active role in the business. This forum must never be a place for personal attacks or the laying of blame. It is an expression of trust and fairness. It is these characteristics, not the bonds of family ties, which oil the wheels of a successful family business.
To set up a successful family council, there are a few points to remember which will increase the chances of success:
I Use a professional adviser as a facilitator who can use his or her experience to see that things run smoothly;
I Set up and follow a timetable for meetings;
I Settle simple matters in earlier meetings. This allows family members to feel comfor table about the council and believe that it is successful. Then you can proceed to more difficult issues;
I Pay attention to the quality of the meetings – make sure that the council really is a place where everyone feels at ease;
I Ensure the council's responsibilities are clearly allocated – there should be a council chairman, perhaps not the business's leader.
A family constitution can provide a long term framework to build both the trust and best practices suggested at the family council. This is a written statement of values and objectives with regard to the business, containing:
I The objectives of the business
I The underpinning philosophy of a family business or a business, which happens to be a family
I Remuneration and equity ownership polices;
I Policies on entering and leaving the business;
I Policies on the role of non-family members; and
I Criteria for succession.
Many family businesses may extend the constitution to cover a range of issues affecting internal and external relationships and conduct. If successful, this process should help to give a strong sense of direction.
Of course, the constitution may create a range of future issues and so detailed clauses on exit or entry may need to be legally enforceable. A formal dispute procedure should also be set up.
The European Commission estimates that around 1.5m small businesses in Europe run the risk of failure due to succession problems in which family conflict is a major factor. Contrary to popular mythology, family firms do not outperform non-family businesses. CFJ
John Davies is head of business law at the Association of Chartered Certified Accountants

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