We’ve reached the end of the official Family Business Week, when the country celebrates the successes of a sector not only responsible for nearly 30% of UK economic output, but a significant proportion of private sector employment.
However, we recognise the long hours most, if not all family businesses expend in the pursuit of success. And so our week of celebrating the diverse success stories of all those that have built on the heritage of their business to inspire the next generation, will include the weekend.
We advise numerous family businesses, across all sectors, from agriculture and logistics to engineering and publishing, helping them address the unique challenges they face, with practical solutions shaped by decades of legal experience.
Our last article looked at how effectively dealing with shares in a divorce can protect the family business, but this time we’re looking at stopping conflicts before they become dramas from which there is no way back.
Family Businesses and how to prevent a conflict becoming a drama
Every fan of soap operas will know the root cause of most of the on-screen conflicts are family or business issues. In many cases a long-running storyline relies on either or both to drag the smallest conflict out into a full-blown drama.
We all know that art imitates life and inevitably, disagreements arise in households and boardrooms across the country, with many requiring legal solutions to resolve the issues concerned. But what can be done to prevent making a drama out of a conflict when the two scenarios combine?
The emotional investment in building a family business and the blurring of different relationships within them means that conflict can prove more disruptive than it does in conventional corporate structures, when those involved can escape the conflict outside office hours.
A breakdown in communication within family relationships, whether across marriage or partnership or across the generations, can have serious implications for organisational cohesion and business as usual productivity.
Good succession planning plays an integral role in ensuring harmony within any business, but especially family businesses. It pays to plan well ahead of any transfer of responsibility and involve all the relevant parties, so they can openly raise any concerns, issues or views they may have.
Taking an inclusive approach can help to explain the rationale behind the decisions made, which will help prevent misunderstandings and provide certainty to everyone in the business, not just family members.
This process can be backed up by implementing systems and structures to ensure fairness and consistency. It makes sense to seek external advice to bring a detached, objective viewpoint to the situation and cover points such as line management, access to training and mentoring, and finance.
One source of conflict within a family business can be competing priorities and objectives. Drawing up a Family Charter is one way of dealing with this collectively.
But priorities can change with time, so it’s important to regularly review this Charter to ensure any dissatisfaction amongst stakeholders is caught early, before it can fester into a major headache.
Every member of a family, working in a family business understands it has a Charter. Typically it is neither spoken nor written, but it is powerful and it shapes the business. It influences how the family interacts with the business and with each other.
The problem is that over time as the number of family members in the business grows, what everyone believes to be true may not be exactly the same. In fact, the view of the unwritten, unspoken Charter may be completely separate for different people.
Drafting a written Family Charter is an important step to help define the rules for the family and the family business, detailing what is expected from everyone, at every stage of the lifecycle of the business.
While it may seem strange and there may be resistance at first, even a simple Charter can successfully reassure everyone striving for success of the family business, that each individual understands their responsibilities to the business and to their family.
Helping define the governance of the business, the Family Charter might detail how decisions will be reached, how problems will be solved and conflicts resolved. Even discussions about the creation of the Charter will likely uncover simmering doubts, conflicts or questions.
We all know prevention is better than cure, but if conflict still flares after taking these measures, what dispute resolution options are available?
It may be possible for the parties concerned to resolve the issue through dialogue, perhaps involving some form of independent mediation – something we believe in strongly here at Buckles – with any agreed outcome documented informally or as part of a shareholders’ agreement.
Another relatively straightforward solution to overcome dissatisfaction would be to consider reallocating responsibilities within the organisation. If the conflict is more deep-rooted or on a wider scale, appointing non-executive directors or managers from outside the family will help introduce more neutrality, if the organisation is large enough to justify such a move.
More sweeping changes might include buying out disaffected shareholders who no longer wish to be involved in the business, breaking the business up or even selling the business entirely.
Whichever route is followed, there could be serious repercussions and detailed, independent and professional advice should be sought before any decisions are made.
If you have any questions about creating a Family Charter and would like more details of how Buckles can help you and your family, please get in touch and one of our experienced team will explain how we make a difference.
It might be the end of Family Business Week, but a conversation with our team, could ensure this is the start of a bright new future for your Family Business.
