How can I tell my son that he has to be at the office early and be a good example to our employees?
I have been giving equal compensation to my children and I know it is not fair to my other son who works very hard. What is the right compensation for my children?
I am extremely worried why my children gave shares to their spouses? What if they passed away and their spouses remarry?
How can my son work in our family business and manage his personal business at the same time?
Shouldn’t the business buy supplies from me? After all, I am part of the family?
What happens if my brother thinks my nephew (his son) should be promoted and his salary increased, but I disagree?
How do we terminate a family member for incompetence or dishonesty?
How do we prevent a sibling from selling his shares? What if it is our competitor?
How do we deal with shareholders who are based overseas and yet have the temerity to always question the way the business is run?
These are just some of the nagging questions that I regularly hear from family business owners. And if left unresolved can be real nightmares!
Without any means to address these issues, it will be a bruising struggle for power that will result into more disagreements, further antagonizing family members and weakening the very foundation of the family business.
Tolerating these serious concerns and sweeping them under the rug and “do nothing” will result to entropy. The consequences of inaction are irreversible.
Policies help avoid problems and conflicts
The best and only option is for family members agreeing on solutions and subsequently formulating family agreements. To avoid making the issues less personal and ensure greater objectivity, it is imperative for the family to engage the services of a third party family business facilitator who will propose initiatives leading to some form of family and business governance.
Problems are predictable and initiating policies before they happen can eliminate or reduce future tension and will de-escalate a major conflict when the founder or patriarch is no longer around.
Family protocols or agreements, if done right, can minimize or avoid a potentially damaging conflict and prevent unnecessary misunderstandings.
The objective is to mitigate the conflict by establishing very clear guidelines and promote the goals of the family and the company towards a joint and collective interest to grow the enterprise. Additionally, it will also strengthen the communication process amongst family members.
When a family protocol is unanimously accepted by the whole family, it tends to be strictly applied and, in most cases, helps to ease tensions that may arise between family members.
A Fair Warning
According to a study published by IESE’s Josep Tàpies and Lucía Ceja, if the protocol is not broadly accepted by family members and its stipulations seldom applied or if the code of conduct is not explicitly made clear and put in writing, the process of trying to implement it will further cause confusion and ultimately render it useless.
The key therefore is a fair process of formulating rules where family members are engaged and compliance without fear or favor.
Prof Soriano is slated to deliver a talk to family business owners in Cebu on March 20, 2017. The talk this month is part of W+B Cebu’s advocacy campaign related to Family and Business Governance. Seats are limited. Those interested to reserve a slot may call Octopus Events at 09159108686 and look for Ms. Cherryl.