Posting by:  Eileen O’Connor, CFP, MBA
Date: February 22, 2010

In my more than 15 years as a management consultant, I have spent quite a few years working alongside (and competing against) McKinsey & Company, a leading strategy consulting firm, on a wide range of strategy and operational issues for Fortune 500 companies.  So it was with great interest I read a recent white paper published by the firm discussing the five attributes of enduring family businesses. 

“The keys to long-term success are professional management and keeping the family committed to and capable of carrying on as the owner.”

Attributes to Success, Unique to Family Businesses

The authors propose that there are five attributes that must be in place and be in sync with one another to ensure that the family business will be successful.  What’s more is that these are fairly unique to family businesses, an oftentimes overlooked ownership structure, but one that permeates our entire economy since family businesses are all around us.

I will describe each of the attributes discussed in the paper in turn as blog entries.  To read the complete article to go:  https://www.mckinseyquarterly.com/The_five_attributes_of_enduring_family_businesses_2498

Successful Family Business Attribute #1:  Family (Forums/Policies/Services)

The study found that successful enduring family businesses had well thought out policies and procedures for how the family would be governed and operate, thereby minimizing conflict over roles and responsibilities:

“Over decades, they (successful family businesses) develop oral and written agreements that address issues such as the composition and election of the company’s board, the key board decisions that require a consensus or a qualified majority, the appointment of the CEO, the conditions in which family members can (and can’t) work in the business, and some of the boundaries for corporate and financial strategy.”

Nipping Family Business Conflict in the Bud

How interesting that many of those agreements are written.  This is a powerful suggestion for a family business since it would help to eliminate potential interpersonal conflicts spawn out of distrust.  And the message is clear—‘we are a business and our family needs to act professionally.’  Such formal policies, procedures and operating agreements makes sense for any large organization; however they take on a greater purpose within the family business.

Once in place, there is an ongoing process of managing these agreements and building consensus around them.  A multi-generational forum, for example, may prove invaluable in building consensus and a sense of trust among and between generations with regard to the management and direction of the company. 

Stay Logged in for the Next Key Attribute…

The second key attribute of an enduring family business – Ownership (shareholder agreements, holding structures, legal documents) – will be the subject of my next entry.

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written by Mike Mercurio, February 26, 2010

Conflict in a family business?!? Impossible! Obviously, this statement is not true. Managing conflict in a family business is paramount because (i) having unresolved conflict means the business enterprise is not running optimally and (ii) possibly most importantly, the family business partners will be sitting across the dinner table for years to come. Hence, unresolved conflict not only destroys the business but can destroy the family. Having a clear, known method to resolving conflicts that is accepted by all family participants as legitimate is paramount. Such method should (ideally) bring resolution to the known conflicts and (hopefully) prevent/resolve the unspoken conflicts simmering under the surface.

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