25 August 2019

Non-Traditional Family Businesses

Balancing the interests of family business stakeholders requires skilful leadership, says Feargal McCormack.

Today, many families are complex and second spouses, half-siblings and non-family members are often involved in the management of family businesses. Like all businesses, family businesses evolve over time and it is not uncommon to have

• family members who are not actively involved in the business,
• family members who are shareholders in the business but not employees,
• external investors who own part of the business but who do not work in it and are not members of the family,
• non family management and employees,
• owners who work in the business but are not family members, and
• family members who work in the business but do not own shares.

Balancing the interests of these different groups requires skilful leadership.

Leadership and Strategy

The first job of the leader is to make sure that everyone understands the business vision. As the business develops, a formal structure becomes more important. Having a written family constitution and a shareholder or partnership agreement are important in this regard.

These written documents set out an agreed process for dealing with many of the issues that arise in family businesses and are helpful in managing situations where conflict can arise.

It is really important that family members familiarise themselves with the different responsibilities of business owners, directors and employees.

Role of the Board

Most successful family businesses have a board of directors and often include non-family members on the board. The Board oversees the business’s vision, values, strategic direction and focus. The role of the Board is important and family businesses should consider bringing in non-executive directors to strengthen the board’s effectiveness and independence. Bringing in external expertise also stimulates fresh thinking and helps make the working relationships of family members more productive.

Family members working in the business

Where family members work in the business, it is important that they add value and work at a level aligned with their skills. Defining each family member’s role and put it in writing is helpful in this regard. Pay levels, progression, expectation, criticism and praise should be even-handed between family and non-family employees. All employees including family members should have signed employment contracts.

Communication

Families often meet informally at social gatherings where business conversations may take place. It is important to find the right balance between formal and informal communication. As family businesses grow, the need for formal communication increases but informal communication will always remain part of the picture. Communication can be improved by strategies such as holding regular, formal meetings that are minuted.

FPM is hosting a Family Business Breakfast Seminar with Newry Chamber of Commerce on Thursday 23 November where we will share more tips and insights on this topic. The cost is £20 for Newry Chamber of Commerce members or £25 for non-members. For more information and/or bookings contact admin@newrychamber.com or call Jessica on 028 302 50303.