The Rules of Engagement Around the Family Business
December 14, 2022
If Hollywood has taught us anything, it’s that family business can be a messy business. From Logan Roy’s brood on Succession to the Duttons of Yellowstone to Arrested Development’s Bluth family, there is no shortage of nightmare family empire tales that paint an ugly picture of family and the family business.
Family enterprises can be a wonderful thing though. There is, generally, an intimate trust that can be found only between family members. It's much easier for families to make decisions quickly and efficiently in a business setting when ties are already so close. Additionally, families who are passionate about the same concept can bring together their unique skills and resources to create a truly successful venture.
Navigating the (often choppy) waters of a family business can be quite tricky though, so having strong rules of engagement is key.
Establish a Family Charter
WealthCo’s Senior Planner, Ryan Mackiewich, CPA, CA, FEA, advises that one of the first steps for the family business is to establish the Rules of Engagement for how they interact with each other. Which should include establishing a family charter.
“So much of the potential conflict within family enterprises boils down to values and purpose. Conflicts often happen when people are doing things that are counter or not aligned to the purpose and value of the organization. By establishing a family charter, a governance document which is meant to codify the values and purpose of the family, the family will have tools and guidelines to assist with maintaining peace and order in the long run.”
This family charter should clearly articulate the rights, roles, and responsibilities of each family member involved in the business. A well-crafted charter outlines expectations and helps prevent misunderstandings, confusion, and resentment among family members. A good charter also promotes fairness for all family members involved in the business which fosters a strong foundation for future growth that everyone can benefit from. Even though ‘governance’ and ‘charter’ can be perceived as complex or complicated, the goal of the family charter is to have a clear and simple document that all members of the family can understand and implement in their daily lives. By getting the key items into this document, in one or two pages, it will have a much better chance of being adopted by the family.
Maintain Your Identity as a Family
When it comes to family-run businesses, one of the most important rules for success is maintaining identity as a family. There's nothing more threatening to the long-term viability of the family enterprise than losing sight of what matters most when running a business.
“It’s important to maintain that identity as a family separate from the business,” Mackiewich suggests. “Whether that is an annual ski trip, Sunday dinners, or a regular games night, carving out that time to simply be a family together is critical.”
Set Boundaries and Communicate Clearly
Family-run businesses have an inherent advantage over other types of companies since family members are able to relate to one another in ways that build trust and work together more efficiently. However, all this can be for naught if clear communication among the members of the family isn't practiced.
“The inability to properly communicate is a pretty common issue with family businesses,” Mackiewich shares. “So often families have well established patterns of communication that may be filled with stress and boundary issues - people may feel that they don’t have equal voices, the conversations may be dominated by certain family members. It can be in our nature to revert to our childhood roles when we get together with our families.”
Establishing strong communication will ensure that everyone involved has a say, in the right way, at the right time. After all, when dynamics are complicated by familial ties and emotions run high, having clear channels of communication ensures that everybody knows where they stand while achieving common goals and objectives.
Address Generational Challenges Upfront
Addressing generational challenges in family-run businesses can be a daunting task for those involved. As generations pass, the way in which a business is run often needs to change to keep up with societal changes and trends.
“Again, it all comes back to healthy communication and honest dialogue. Coupled with having an open mind to the changes in generation. Being open to always learning as you get older. Things change, societies change - if you want to have a respectful relationship with your kids and their kids you need to be able to talk about the things that are important to them.”
It's also important to realize that solutions don't always need to be overly complicated - sometimes, the tried-and-true methods such as embracing innovation, leveraging expertise, and staying organized are more than enough to ensure success over multiple generations.
Reaping the Rewards of these Rules of Engagement
The potential rewards of laying the groundwork and foundation for a thriving and healthy family business can be abundant. Consider Kal Tire, which is just one of many Canadian family enterprise success stories.
Founder Tom Foord started Kal Tire as a single service station in Vernon, BC in 1953 (the Kal in Kal Tire is a nod to their local Kalamalka Lake). Today Kal Tire is Canada’s largest independent tire dealer, has 260 retail and commercial stores across Canada, is an international leader in mining tire services with 150 mine sites across five continents, and employs over 6,500 people. And$1.3 billion in annual sales. In 2005, Foord’s son-in-law, Ken Finch, took the reigns as President, and then Foord’s youngest son subsequently became President in 2009. The family credits their success and ability to maintain harmony in the family to a culture of collaborative decision-making.
Could your family-run business benefit from the support of a family enterprise advisor (FEA)? Our Integrated Advisory Community includes FEAs that have seen it all and are in an excellent position to advise on family business matters. Reach out to your accountant and they can connect you with the right resources.
A member of WealthCo’s Integrated Advisory Community, Ryan Mackiewich, CPA, CA, FEA is a Senior Planner with WealthCo. With over 25 years as a CPA, CA providing tax and business advisory expertise, Ryan also holds the Family Enterprise Advisor (FEA) designation and applies it to working with business families to help them effectively transition business, wealth, and roles. When he’s not doing that, Ryan loves to camp, hike, and explore all the wonderful places the world has to offer.
The Integrated Advisory community consists of a network of progressive CPA firms, along with best-in-class professional advisors, service, and product specialists, who work together to deliver an elevated and holistic client experience. One that optimizes both their personal and professional lives with an integrated financial strategy designed to help clients reach their goals.
Financial Planning and Wellbeing
The current cost of living crisis, against a backdrop of bleak economic predictions, is a significant cause for concern for millions of people.
General Interest - Personal
Everything You Need to Know About the First Home Savings Account
The FHSA aims to assist aspiring homeowners in saving the necessary funds for a down payment on a home, a prospect that gets harder and harder with each subsequent increase in average housing prices.