Time for a family meeting

If familiarity breeds contempt, then assumptions must share part of the blame. When casual assumptions about the people and situations you think you know go wrong, they can toss up nasty surprises. In a business, this is where the apparent advantage of working with family members can actually be a hidden danger.

It may be easier to raise capital and brainstorm new ideas with family members, however it can also be easy to take them for granted and assume you know everything about their beliefs, preferences and opinions. While families might know each other inside-out at home, they should not assume it’s the same in the business environment where decisions have consequences on both personal and financial levels.

Frequent and honest communication should be a regular feature at a family business – yes, the simple family meeting. Sitting down and discussing what may appear to be the obvious could just save important family and business relationships.

To get started with a meeting agenda, consider these common assumptions:

I know my family well so there’s no need to tell everyone everything

Here’s the big one. Clear, two-way communication can help avoid sibling rivalry and misunderstandings between family members. New policies, processes and decisions should be explained honestly and to everyone in the business. When only snippets of information are shared, or news is only communicated to some employees, not others, feelings of exclusion can develop. At worst, these can lead to mistrust and rifts in the family that can come back to bite the business at a later stage. Don’t assume you know the business and operational thoughts of your brothers, sisters, parents and uncles, instead take the time to seek their opinion and ideas.

Important decisions should be made among the most senior family members

The average age of a family business owner is 55 years*, and while seniority may count for something, it doesn’t mean that younger family members should be excluded from contributing to decisions. They may not have the final say in the choice of a new supplier, or the launch an advertising campaign, but they should have the chance to suggest new ideas, brainstorm and provide constructive criticism. Younger people often have the fresher, more creative ideas that senior employees can’t assume to know. And importantly, involvement in decision making will help them develop confidence and a sense of ownership in the future of the family business.

I’m the eldest child, so I’ll inherit the business when my father retires

Succession or estate planning is something all families should talk about, especially if the business is generating profits. Statistics from Family Business Australia indicate that while 41 per cent of owners intend to pass their business on to family members, only 20 per cent have a succession plan for the CEO*. Without succession planning, there may be stressful and long-lasting arguments between employees who assumed they were next in line. In the worst case, such disputes could lead to legal action. Accounting company BDO suggests appointing a family member or caretaker manager prior to the CEO relinquishing control of the business, or appointing a professional and trusted non-family member. Liquidation or the sale of the business can also be alternatives to succession plans.

My family should get paid regardless of their contribution, because it’s a family business

An immediate and constant challenge for many family businesses is how to distribute pay across family members. Some employees will assume they will get paid because they’re part of the family, regardless of their contribution, while others may feel they are being under-compensated. Financial compensation is a key motivator, so it’s crucial to define the rationale behind payment decisions. Thrown into the mix is the need to ensure that non-family employees are treated and compensated with equality.

A survey conducted by KPMG and Family Business Australia reveals that one-quarter of businesses are paying family members more than non-family members for similar work, while 61 per cent are paying the same amount. Additionally, 63 per cent of firms reported family members worked longer hours than non-family members. It’s important to pay on merit, position and performance, and not because of family connections.