Communication is the key to family business harmony

Being able to share a passion for your business with your family can be hugely rewarding. But when things go wrong in a family concern the fallout can be felt far and wide.

That is why it is vital to have proper structures in place to mitigate those affects and prevent real damage to the business and relationships.

The problems often start when second and third generations start to be involved and power and decision making is spread amongst wider family who have differing skills, expectations and work ethics.

Problems may start to arise when businesses are handed down to cousins and beyond where there may not be the same shared ideas as held by the previous generations.

Family members with completely different abilities may be rewarded with the same salaries, bonuses, dividend and benefits regardless of their respective contribution to the business – a situation that simply would not happen in non-family run businesses.

These differences can build up resentment that starts to have effects on relationships outside the business. Throw in the opinions of in-laws and the problems can get worse.”

It is important to at the start of the business’ life to make sure everyone is clear about their expectations and requirements and how things will be handled if situations change.

Have a shareholders agreement drawn up by a solicitor specialising in business matters. Advice on the content and implications is needed such that there is guidance on the type of issues to be incorporated into an agreement.

Consider the Articles of Association and whether there needs to be specific clauses that relate to the management of the business. Generic articles adopted when most companies are formed will not be specific on a number of issues that could arise.

Also be mindful of succession planning in advance. Individuals may have ideas that don’t fit with other family members so it is better to address early to avoid misunderstandings.”

I’d also recommend a general code of corporate governance. It would be a mistake not to hold regular meetings to assess, plan and communicate. Many problems can be avoided by good communication.

Giving clearly defined roles to individuals can also create a team mentality and it pays to agree a method of dispute resolution.

Also, and importantly, don’t bring things home. Keep work at work is sound advice for everyone but especially in family businesses. Likewise, don’t take it to work.

Problems and issues at home should not prevent a professional and focused attitude at work.

To discuss any issues raised by this article please call me on 01772 430000