How to Implement the Best Practices for a Family Business

According to the Family Business Institute only 30% of family businesses last into the second generation and a mere 12% are still viable into the third generation. That’s why it’s critical for family business owners to make sure they are instituting the best practices that can keep their business strong for generations to come.  Here are a few we recommend.

Formally identify your company values and focus on them.  

In a recent study, 70% of family business owners said they believed having a clear set of agreed-on values helped increase revenue and profitability.  They also believed it gave them a competitive advantage in the marketplace. On the other hand, even though they felt it was important, only 49% had formally established their company values in written form. (Global Family Business Survey 2018)

Stating your company’s values can inspire trust from both family and non-family executives. In general, the values most likely to be shared by successful family businesses include respect, integrity, quality, humility, passion, modesty and ambition.A well crafted statement of your company values becomes a type of moral compass that can provide guidance when you are faced with difficult decisions in the future.  

Create and maintain good governance.  

The first steps toward good governance require that you make a commitment to professionalism, clarity of responsibilities and transparency. At a minimum you need to clarify company structure, establish processes for accountability in all areas, specify roles and responsibilities and formalize your company vision and strategy.

Identify talent. 

The most successful  members in the company, family or non-family, will be those who have the opportunity to learn valued skills and grow into the business as they assume increased responsibilities.  To perform at their best they should be expected to get an appropriate education, gain some early experience in an outside organization and spend time learning in the various areas of your company. 

Hire Carefully.  

Make sure that all newcomers are comfortable or even enthusiastic about the family culture and values.  This is as important as their skill set and expertise.

Develop both family and non-family talent. 

 Developing talent is essential to the continued success of your business.   Encourage mentoring by your executive team, create internships for young family members and provide cross-training to younger employees to broaden their experience. Don’t allow people to stay in positions for which they are not skilled or suited: this includes family members. 

Develop a disciplined succession plan.

  This includes identifying future leadership and making sure they are willing and prepared, creating a process for decision making, understanding tax and legal implications and being sensitive to family relationships that could influence a successful transition.  It’s important to view this as an ongoing process rather than a one time project.

Maintain the influence of “family gravity.”  

Your family values both in the company and in the community are strong forces that helped create your success.  The most successful family businesses find ways to consistently infuse the company with their unique family culture.