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  • Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 10/18/2012

Tackling disorganisation in a family-owned business 

Tackling disorganisation
Chronic disorganisation causes unnecessary problems for family-owned businesses, reports Triangle Business Journal. This disorganisation is often a spill-over from a disorganised family life and can result in gross inefficiency which impacts on workforce morale, productivity, and eventually, profit.

Don’t let chaos and disorder ruin your family’s business! Take these five simple steps to get your family enterprise working like a slick and well-oiled machine…

Step One – Set up a Family Assembly and Family Council

A family assembly is an official forum where all members of the family can discuss business issues and how family issues impact the business. The family assembly will meet periodically – usually once a year.


A family council is a governing body elected by the family assembly to deliberate on family business issues.The family council will meet more often, perhaps once a quarter.

Step Two: Draft a Family Constitution

A constitution outlines the family’s commitment to the core values, vision and mission of the business.

Step Three – Define the key governing bodies

A governing body is a group of people mandated to govern an organisation. In a typical family business, these governing bodies include:


  • The Owner-Controller or CEO
  • The Senior Management Team
  • The Board of Directors
  • The Shareholders.

Step Four – Define the roles and responsibilities

Chaos often ensues when various parties are unclear on what it is they’re supposed to be working towards, how they fit in with other parties, and how they’re expected to fulfill their duties. In order for each of the key governing bodies to function effectively then, their roles, responsibilities, duties and functions must be clearly set out…

The CEO

In a first-generation family firm, the CEO is, in all likelihood, the founder/owner of the business, through in subsequent generations it can be a non-family member. Responsibilities and duties include:


  • Being the figurehead of the company
  • Anticipating problems and creating a company culture which can circumnavigate or overcome such challenges
  • Putting together a senior management team, in consultation with the Board of Directors, Family Assembly and Family Council
  • Defining corporate strategy and direction
  • Being held accountable for the success or failure of the business.

The Board of Directors

Explains John A. Davis, Senior Lecturer in Entrepreneurial Management at Harvard Business School, a Board of Directors is legally elected by the business owners and has legal responsibilities and powers. These include:


  • Representing shareholders’ interests – protecting their assets and ensuring they receive a decent return on investment
  • Protecting the interests of the company – a delicate balancing act, sometimes, when shareholders and company interests appear to be in conflict
  • Developing policies which enable the business to achieve its goals
  • Overseeing the family’s involvement in the business.

Davis advises against enrolling family members, close family friends or associates, like the family lawyer or accountant, on the Board of Directors.

The Shareholders

Shareholders are individuals who own shares in the business; usually family members. Amongst other things, they have a responsibility to:


  • Act in a way which doesn’t devalue others’ investments in the business or disturb the financial stability of the company
  • Act in accordance with the well-being of the company.

While they don’t play a direct role in managing the company, decisions they take at shareholder’s meetings (by way of a vote), must be implemented by the company directors.

Senior Management Team

The Senior Management team takes on the specific day-to-day management of the business. They’re responsible for organising and directing the actions and activities of groups of people, monitoring their work, and taking any necessary corrective action.


Your senior management team can comprise family and non-family members. However, cautions Davis, where family members are concerned, always ensure that they’re up to the job with the appropriate education, skills, expertise, and experience.

Step Five: Draft a policies and procedures manual

Written policies and procedures may seem very corporate-like for a family business, but setting out these policies in procedures in a written document keeps things crystal clear when issues, disputes, or challenges arise. Include your business’s organogram the name and description of each operating unit and who heads it up, as well as remuneration and benefits policies, human resources policies, and other basic business procedures.

 

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.
 

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