Read an Excerpt
How to Build a Stronger Family and a Stronger Business
By Craig E. Aronoff, John L. Ward
Palgrave Macmillan Copyright © 2011 Family Business Consulting Group
All rights reserved.
Some of the nation's best-known public companies are striving to create family-like dynamics in their corporate cultures.
Executives at General Motors and General Electric are stripping away bureaucracy and stressing a shared sense of mission. General Mills seeks recruits who share the company's values. Johnson & Johnson wins praise for fostering an intense, familial culture that breeds a strong sense of identity among employees.
These executives realize something that many business families have not:
The values, ideals, and sense of purpose nurtured by the owning family are a potentially vast source of strength and energy for business. A healthy owning family with strong values, in fact, may be the greatest resource a business can have.
How does family business ownership tap the potential power of the family as an engine to drive the family business? At the same time, how can the owners make the most of the business as an opportunity for the family to grow, develop its potential, and manifest its values and dreams in society?
Thousands of business-owning families have used this book over the past decade to guide their family meeting process. During that time, we've learned more about family meetings through research and through our experience of consulting with hundreds of family businesses. We have also learned that frequent family meetings are one of three factors that correlate significantly with family business longevity (the other two are strategic planning and active boards of directors).
Considerable new material has been added to this second edition. New case studies have been added. Advice is now offered on family meeting leadership, balancing meetings between business and fun, relationship development and information sharing, activities to do at family meetings, and holding family retreats.
Two things are essential for long-term family business success: a strong business and a strong family. This book helps you to achieve the latter which in turn helps you to achieve the former.CHAPTER 2
The Value of Family Meetings
An important way to move toward the goals of a strong business and strong family is through family meetings.
These periodic gatherings bring the family together to share goals and decisions; discuss common problems; learn about the business; and preserve family identity, values, and traditions.
Family meetings can help build a stronger family and a stronger business. They help the family plan for the future of the business in an orderly and constructive way. They can smooth such difficult transitions as the succession of new leadership or the professionalization of the business. They can avert painful and costly conflict by helping the family address early and openly the issues that inevitably arise in family business ownership.
Our research and experience have shown that the implementation of regular family meetings is one of the three most important steps that business-owning families can take to ensure the continuity of the family business. (The other two steps are to establish an active board of directors and for the business's leadership to engage in ongoing strategic planning.)
Once begun, family meetings often take on a momentum of their own, sparking family mission statements, family-education projects, shared vacations, philanthropic efforts, family histories, venture or scholarship funds, and other creative efforts.
The following pages offer comprehensive guidance for planning and making use of family meetings. Part I describes ten of the major benefits that can be gleaned from family meetings. Part II tells how to plan and conduct the first and continuing meetings. Part III illustrates some milestones that can be reached in family meetings, recounting stories and examples of actual gatherings of business families around the country.CHAPTER 3
Families often hesitate to convene regular family meetings. For some, the formality of meetings seem strange when family communication has been spontaneous and informal. For others, a meeting's democratic spirit seems unsuitable for the inequality of parents and children.
Some have the baseless fear that family meetings will convert the management of business and family affairs to a democracy. Others resist sharing even a small amount of information about the business. For others, holding meetings means facing difficult decisions, such as whether or how to pass the business on to the next generation.
Many families, even those who are not business owners, find regular family meetings to be a great way to discuss issues, make joint decisions, and coordinate busy lives. Business-owning families, in particular, find compelling reasons to begin family meetings, even at the earliest stages of the family business. Here are a few examples:
* One entrepreneur hoping to instill strong values in his children started family meetings when they were still in elementary school. He explained the value of budgeting—in his children's case, for their monthly allowances—and the importance of meaningful work. Then, he arranged visits for the children to his business, where they could see the challenges and rewards of his long work-days.
* Another family intent on fostering a sense of stewardship started meetings as younger members were entering the business. The founder focused on teaching the responsibilities of business ownership, including managing capital for the benefit of all the company's stakeholders—employees, customers, suppliers, and the community at large, as well as the family.
* Another family began meeting when the mother realized that the business her husband had founded was on the brink of becoming "a family business." She had seen business disputes tear other families apart, and she wanted to discuss policies for family participation in the business before any conflict arose.
* One family gathered for the first time to discuss the future of the business. The second-generation owners realized that arrangements for stock transfer needed to be made if the business was to be passed on. As the family considered the question, "Should we keep the company or sell out?" they became aware of deeply felt, shared values among third-generation members that no one had been conscious of before.
* Another family called second- and third-generation owners together when it became clear that the number of shareholders needed to be sharply reduced. After careful preparation, the active second-generation owners won unanimous backing for a broad buyout plan that left the business adequately capitalized.
* A successor, one of three second-generation siblings who would share ownership of the family business, urged his father, the founder, to start holding family meetings. His goal: to educate his sisters about the business and reassure them that he would be an open and accountable CEO.
* The second-generation owners of another company held a family meeting when they became concerned that accelerating stock sales by third-generation members were siphoning off needed capital. A presentation by the aged founder, a patriarch loved and respected by all, persuaded younger family members to give top priority to growing the business in their financial plans.
It is never too late to begin family meetings. Exhibit 1, "Family Business or Family Glue?" tells the story of a large, famous family-controlled business that didn't begin meetings until almost a century of owning and leading the company. The family meeting process was critical in smoothing transitions from the third to the fourth generation. We urge all business-owning families to start their family meeting processes as early as possible.CHAPTER 4
Ten Benefits of Effective Family Meetings
Let's take a more detailed look at ten of the significant goals and benefits that can be realized through family meetings. (Please see Table 1 for a summary.)
1. BUILDING A STRONGER FAMILY
Meetings are a powerful medium for strengthening the family.
They are the best way to help family members discover and build on the common ground that unites them. Our experience shows that families that spend most of their time in conflict are those that focus on the things that divide them. As discord becomes the family focal point, it eventually becomes a habit and can consume any feelings of goodwill or mutuality.
The families that succeed together, on the other hand, are those that focus on, "What do we have in common?" Rather than concentrating on their differences, these families build on their common foundations—shared values, goals, and assumptions about the way the world and the business operate. These families still have conflicts, but they keep them in better perspective. They foster bonds of love and friendship. They listen to each other.
In the process, most family members learn a lot about themselves and the business. To understand their role in helping plan for the future, family members often must learn something about strategic, capital, estate, or succession planning.
Family meetings also give individual members a chance to develop and display such skills as leadership, conflict resolution, listening, speaking, teaching, and managing and conducting meetings. Some families use family meetings as a vehicle for a formal personal-development program. They arrange workshops in problem solving, conflict resolution, and other personal-development skills. Such efforts can promote teamwork and help individuals achieve their personal goals.
Some families pass various family meeting roles around to allow everyone to exercise these skills. This gives the family an opportunity to evaluate potential successors to family business leaders. It also helps reveal potential future leaders of the family—who may not necessarily be the same people who lead the business.
Other families actually study how families work to gain insights into how past patterns of behavior affect successive generations. They might employ an expert in family behavior to conduct workshops. Lessons and stories from the past, as well as discussions of the family tree, family relationships, and the impact of such family problems as sexism or alcoholism, can all be helpful in understanding past conduct.
Studies of a family's developmental cycles can be useful as well. Family members are more closely connected at certain stages of family life, for instance, such as the child-rearing stage, than they are during others, such as maturity or retirement. Once family members become aware of patterns, they often can bring problems under control and build on the family's innate strengths.
Finally, the sense of participation and mutuality engendered by family meetings can sustain the family—and in some cases, the family business—in tough times. As the family grows more distant from the business through successive generations, for instance, the risk of a family breakup grows. Family members who have sold their stock may feel that they have been cut off from the family.
Family meetings at this stage can become a focal point for shoring up individuals' identification with the family. And they help in planning activities that involve all family members.
2. BUILDING A STRONGER BUSINESS
Family meetings fortify the shareholder base with several positive results. A cohesive, well-informed group of shareholders and family successors is far more likely to promote effective planning for succession and other major events, averting an array of potentially serious problems.
Family meetings also send a powerful message to the outside world, including employees, customers, suppliers, and the community at large, about the prospects of the business. One of the most common stereotypes about family business is that the owners are likely to abandon the enterprise at any time, leaving employees, suppliers, customers, and other constituents adrift.
The most potent remedy is a signal, through regular family meetings, that the family is working together in a responsible way. Signs that the family shares a sense of commitment or mission can turn employee uncertainty into a spirit of optimism.
A united family can set the tone for an entire corporate culture, a powerful influence on the performance of the business. A family that articulates its values can help managers develop a sense of mission and impart it to employees. The family's vision also can foster a sense of corporate identity that will help motivate employees, guide the company's relations with outsiders, and even sell products.
Family meetings also can aid recruiting. Many skilled and experienced professional managers avoid family businesses because they fear a lack of cohesiveness and responsibility among the owners. Awareness that the owning family works hard at planning can allay that fear. Family meetings also can help recruit talented future business leaders from within the family by educating the family and fostering good communication.
Even if a family cannot commit to continuing ownership of the business, family meetings signal that the family will act responsibly, avoiding abrupt or unplanned changes of ownership or leadership.
3. PLANNING FOR FUTURE OWNERSHIP
All family businesses reach crossroads when major decisions arise about the future of the business, the owners' estate, leadership succession, or the role of the family in the business. All of these issues should be the subject of careful planning efforts. And none of them can be resolved in a vacuum.
Family members can't complete personal financial and estate plans without deciding what to do with the family company. Strategic planning is difficult without knowing who will lead the business in the next generation and what the current owners' capital needs will be. A successor cannot be chosen without some knowledge of the business's future strategy and the current leader's plans for the future. And, often most important, none of these plans for estate, strategic, or succession issues can be laid without a sense of the family's intentions and commitment to the business. Many business owners face the need for these interrelated plans as they approach retirement. They wonder: What shall we do with the family company? Should we commit more cash to build for the future? Should we consider a sale or merger? What do the kids want to do? How committed is the next generation to keeping the business in the family? And how well do they understand what that means for their future?
At this stage, many parents invite the next generation into the planning process. This may begin a series of family meetings that evolve as the family's needs change.
The earlier the family begins planning for the future, the less likely it is that they will have to experience the abrupt, untimely, or forced sale or liquidation of the business or an awkward, unplanned leadership change. Some specific examples of how families have used meetings as a planning tool are contained in Part III.
4. PLANNING FAMILY PARTICIPATION
The role of family members in the business is an important and complex issue in many family enterprises.
Which family members should be allowed to work in the business? Are in-laws welcome? What preparation, if any, is desired? How should family members' titles and authority be determined? How old is too old to enter the business? Should family members be permitted to hold summer jobs? What if a family member doesn't work out as an employee?
Some families face these issues when their children are still young. A family meeting can be a good way to allow children to take part in discussions about participation rules and to learn the reasons behind them. "If we're going to open this door, we need to lay fair ground rules and communicate them effectively," parents reason.
Some business owners already have made a decision about family participation rules, but hold a family meeting to discuss the issue anyway. They usually do this before any second- or third-generation family members join the business, to avoid setting a precedent that might be misunderstood or cause friction.
5. MANAGING INHERITED WEALTH
A major concern of many family business owners is, "What is all of this material success going to do to our kids?" They may have seen wealth and influence hurt the children of other business families by fostering irresponsible or decadent lifestyles. "Everything I see tells me that the kids of overachieving, materially successful, highly visible families have some extra burdens and problems," these parents may say. "How do we help our own kids deal with this issue?"
Family meetings can be a vehicle for infusing important values and a sense of responsibility in the next generation. Some families spend time discussing such questions as, "What responsibility do I have to give back some of my wealth to the community? What philanthropic goals do we believe in?"
Meetings can also be a vehicle for helping children cope with the daily stresses they may face because of their family's high profile in the community. The daughter of a BMW dealer may face jealous taunts if she drives a new BMW to school. A youngster may be teased on the playground if a truck bearing the family business name drives past. The children may also face pressure from those who assume that the family is in a position to donate money to any and every cause. Discussion of their experiences can help children emerge feeling fortunate—rather than cursed—to be part of a family of business owners.
Excerpted from Family Meetings by Craig E. Aronoff, John L. Ward. Copyright © 2011 Family Business Consulting Group. Excerpted by permission of Palgrave Macmillan.
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