Optimising performance in the family business

The dynamics of the family unit are very different from the dynamics of a business unit. When the two are combined within a family business scenario, with perhaps two or three generations of the same family working in that business, the potential for a range of conflicts is multiplied.

Family businesses face unique and difficult challenges in aligning the aspirations of everyone involved. Keeping all strands of the family happy can directly conflict with making the tough and brave business decisions that non-family businesses can make without fear of a family fall out.

To optimise the performance of a family business, and thus enhance income and value for those involved, a great deal of self reflection and honesty is required in answering some key questions:

• Does the business have a functional management structure?
• Are the right people engaged in the right roles in the business?
• Are jobs being given to family members before better external candidates?
• Do family members with jobs in the business really want to be doing that particular role?
• Is the family as a whole drawing too much remuneration for the efforts and skills that in return they give to the business; leaving little for working capital or for investing for business growth?

There will be many other similar questions to ask and typically these will be very difficult issues for the family to address.

There is no doubt that, where appropriate, a non-family Managing Director and/or a strong external adviser will go a long way to bridging these issues through facilitating an open and honest discussion, thus helping management make the right decisions to drive optimal performance in the family business. We are helping many of our family business clients take the first step in this direction through a Blue session.

Douglas Russell, Partner, Dumfries