Get The Answers: Clear strategy vital in family-run firms

Lyn Sykes. Photo / Supplied

Establishing firm boundaries on job roles essential to avoid conflict, says Lyn Sykes, Australian family business expert and recent guest of the National Bank.

If you think family dynamics can flare up around Christmas, think about the challenges there must be in running a business together. If you are contemplating setting up a business with relatives, a well developed communication strategy on how decisions will be made and how conflict will be resolved are essential.

How do some families resolve giving certain family members their roles?

The division of roles is important for harmony but like many things in a family business, many assumptions are made that often lead to conflict. The most important role to clarify is the parent/employer and the child /employer role. Unfortunately both generations tend to flip-flop a little and the boundaries become blurred. Sometimes, instead of responding as an employer we respond as a parent and the blurring begins. Extend this to performance communication and many other areas of the business and you can see the sort of problems emerging. If a family business has more than one child in the business, really clear roles are crucial. The documentation of roles is often neglected in a family business as well "because we don't need to do those sort of things" and when a problem arises they have no document to refer to. Often their memories differ.

Do families tend to underpay themselves in the business? What problems can this lead to?

Families frequently underpay and it leads to all sorts of resentments. Families need to reach an agreement about the value the employees who are family bring to the business and these agreements need to be documented. Families may choose to meet the value in less conventional ways than other businesses and this is fine as long as it is defined and agreed. Families have very different expectations of family than they do of other employees, many of which they are absolutely unaware of until they are not met and they feel angry or disappointed. The point of entry is a crucial time for families to have some help in clarifying how things will work in relation to money, targets and succession.

What questions do you ask when you come into a family business not well prepared for succession?

Wills are important and can cause misunderstandings. You are aiming for transparency here and giving the parents an opportunity, while living, to see how their children, those in and out of the business, would be affected and how they may react to the will. Other tricky areas are around loss of children and relationships.

What happens when the business owners don't want their children to join the business but the kids do?

Most parents do want at least one child to return to the business. But I have worked with families where this was not the case and, because of unclear boundaries, the kids just "lob" and stay and this is usually a real recipe for dramas down the track. It is often a case of unexpressed expectations. The problem I see far more often is farming families taking a child into the business without a plan or when the business cannot support more family members. So parents start to cut themselves short, other family members see this and resent the sibling who is in the business because they think their parents (and also they) are missing out.

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