Top 10 questions for family businesses, Part 2
Last week, we looked at the top five questions family businesses need to ask themselves, namely: Does the company have an organization chart and do employees abide by their job descriptions? Are company goals smart and is there adequate planning for them? Are reviews of procedures, products, financial indicators done regularly? Are the resources of top people dedicated to non-routine tasks? Are policies written down and communicated clearly to all?
Let us now discuss the five other essential questions for family businesses.
Does the family business have a succession plan?
Founders cannot live forever, however much they may believe so. Wise founders prepare for contingency. They may train successors as early as possible—if it is their son or daughter, they often start from childhood. If it is a non-family professional, then he or she would already be shadowing the founder in tasks big and small, in order to have the expertise and confidence to take over if needed. Wise founders communicate their succession plan to everyone involved, starting from family members (whether or not in the business) and even to non-family employees. Sometimes, the successor takes over for a trial period, when the founder is, say, on vacation. The more the number of capable executives who are cognizant and competent to handle crucial aspects of the business, the more the business can thrive.
Are so-called informal agreements with distributors, customers and other parties finally put into writing?
Many founders pride themselves on the fact that their word is as good as gold. While this may hold true in some cases, we know ad nauseam of friendships broken and relationships shattered because a verbal contract is misunderstood by one party or the other. Even with the best of intentions, memory can be tricky. Did you and your supplier agree on 100 or 200 bags at a 20 or a 30 percent discount? If you hesitate to have a partner sign a formal agreement, at least follow up your (verbal) conversation with an e-mail thread which the other can acknowledge. Spelling things out minimizes unnecessary conflict in the future.
Do key employees, family or non-family alike, communicate effectively?
A family business can only succeed if key employees work well together. Effective communication is key. How do your top people deal with disagreements? Is there one-upmanship among them? Are they lobbying for your favor? Do they say negative things behind each other’s backs? If founder-owners often quarrel among themselves, chances are the people working for them will try to curry favor with one member or another, to the detriment of the business as a whole. Stop gossip in its tracks by providing a regular open forum, weekly or monthly, for key personnel to express their views, challenge each other’s opinions, or simply to trade insights.
How can the company develop employees to meet growing demands?
In many family businesses, long-time employees tend to become complacent, refusing to update their skills or even to welcome any sort of change. While these trusted people provide stability, they may also hamper company growth, particularly when the next generation take over the business. Wise leaders think of ways to provide lifelong learning opportunities for employees, such as seminars and workshops facilitated by experts in the field. Aside from training, stagnant employees can probably benefit from a change in assignment or even an increase in responsibility.
Are outside advisers available to provide alternative viewpoints or counsel?
Not even the most successful founder is free from any bias. Outside persons, such as trusted friends and colleagues who are expert in their fields, can help provide much-needed perspective on various aspects of the business. A marketing professor can help improve distribution operations; a tax lawyer can help find legal ways to minimize unnecessary payments; a family business consultant can help smooth out conflicts among key personnel. Since these advisors are not involved in the day-to-day functioning of the business, they tend to be more objective and less emotional about issues. Professional board directors may be expensive, true, but you can always ask a trusted friend to sit on your board. Ensure that he or she is not a competitor, and can respect confidentiality.
How can the company motivate employees who belong to different generations?
Much has been written about the differences of work practices among different generations: Baby Boomers, Generation X, Generation Y, and soon, Generation Z. We address this issue next month.
Next week: A Christmas prayer for family businesses
Queena N. Lee-Chua is on the board of of Ateneo de Manila University’s Family Business Development Center. Get her book “Successful Family Businesses” at the University Press (e-mail [email protected].) E-mail her at [email protected]
