Running a Business Like a Business

Highly functioning families that are in business together generally display some traits in common.  For instance, they run the family as a family, run the business as a business and skillfully communicate; and maintain a reservoir of trust.  These traits strengthen the relationships in the family and the business.

A business-first business operates in a professional manner and the family is an asset to the company.

“Business first” families support what is best for the company, its customers, employees and shareholders. They select sound business principles to govern hiring, compensation, and titles. They reason that such principles are fair and constitute excellent criteria by which to make tough decisions that will affect the entire family. They are willing to abide by these principles even if they lead to unequal treatment of family members or to selling the business.

A business-first business promotes:

• Good planning
• Clarity about what your business is
• Understanding your  core competencies
• Effective accounting and financial controls
• Role clarity in the company and the family
• Well-defined individual responsibilities
• The definition and distribution of authority
• Personal accountability
• Performance reviews of family members who work in the company

Family business members can learn a lot by asking themselves: “What do we do that we would not do if it we were not a family business?” Would we allow someone who doesn’t work for us drive one of the business’s vehicles for personal uses? Would we write off a personal vacation for someone who doesn’t work for the business? Would we keep cousin George in charge of sales even though he does such a poor job that we’ve had to hire a pistol to do George’s work for him? Or would we hire the pistol and fire George? Do we hold our family employees accountable for performance?

If your company permits a lot of activities that a nonfamily business would not consider rational or defensible, the business is probably being run like a family.

A $400 million company keeps its own corporate plane. Should it? Does the geographic distribution of sites justify this expense? In fact, the company doesn’t come close to needing a plane. It has a corporate plane because the family likes it. Although it is used for business, it doesn’t make good business sense; it fills an ego need.

A business that is run like one will survive to serve the family. A strong family that understands its boundaries will be an asset to the business. Running the business like a business involves governance structures such as a Board of Directors and a Family Council and policies, procedures and plans.