Building a Family Business Philosophy
At the Entrepreneur and Family Business Council, we define a family business differently. The way we see it, your employees, partners and investors in one way or another are family. Your business is also a significant family asset.
Now more than ever, businesses need to adapt in order to stay relevant and ahead of the competition. Roots: A Course for Anchoring Your Business is a high-level overview of the 12 Best Practices of Successful Businesses. We provide steps and implementation techniques toward positive change that keeps your organization strong for future generations.
There are three ways we can experience change.
Evolutionary – As the world we live in changes, we must adapt and grow to keep up with our environment.
Induced – Something traumatic or significant happens and forces change.
Proactive – Change occurs by your own design.
Here, we’ll look at one of the practices taught in the course:
Solidify a Family Business Philosophy.
This is where you ask yourself:
“How will we operate as a business and family together in harmony?”
These philosophies usually stem from the values developed within the family first. Similarly for the entrepreneur, the business founder creates the foundation for the culture and what values will drive the business.
There are five aspects to consider in your business philosophy.
Employment: Some business owners require family members to work for minimum period of time outside of the family business. This brings outside experience and perspective, as well as the opportunity to work under management that isn’t part of the family. Other businesses operate differently, encouraging members of their family to work within the business as interns and/or after earning a degree.
Ownership: Is ownership of the business purchased, earned or gifted? The choice is yours, but it’s important to clarify “the how.” How can the next generation buy out ownership? What qualifications must a person meet before they earn ownership of the business? How and to whom is the business gifted? Consider that multiple members of the next generation will potentially be involved in any of these options.
Compensation: Do family members have agreed upon compensation benefits, or does every employee and job operate at market value? If compensation is based on various performance values, are those defined and consistent across the business?
Management: How does your business decide management roles? When you work with both family and non-family, it’s important to have expectations for coming into a management role. Decide if you will keep management roles within the family or if non-family employees have equal opportunity for those roles.
Conflict: Have a defined process for addressing and resolving conflicts. Determine who has a voice in the outcomes. Is the process fair? Does every member of your group or family have the chance to be heard?
How you build your business philosophy will help form a Family Charter. This is the agreed-upon way that you as a family and/or as members of the organization operate and communicate.
Why are business philosophies and charters necessary?
A Family Business Charter gives you a roadmap for accountability, processes and procedures. Without the structure of a charter, the key aspects of your culture and policy can be lost between the generations of leadership. It’s important to have these processes consistent, documented and regularly revisited.
Learn more about our family business curriculum course and the Family Enterprise Foundation (FEF) here. You can also visit their website. Check back to the EFBC blog for other information and resources.