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The Family Business Golden Rule: Open and Honest Communication

Good communication is a critical life skill. Every day literally hundreds of advice columns,

like this one, talk about the importance of improving communication with your subordinates, family, neighbors and friends. At times we all struggle with communication and we can all use a little help in being better communicators. But in a family business, this is not just an idle New Year’s resolution, such  as exercising more: the fact is that improving communication is crucial in order to survive. Just like exercise, you need to do a little every day.

 

When looking at all of the components required for a successful family business, it is communication that leads the list as the most important element to make things work. The typical problems that plague family businesses, such as lack of trust or failures to professionalize are usually the result of poor communication. As these problems can literally take down the business, good communication is essential. However, the problem is that communication in a family business is not a simple task. In fact, you must be able to simultaneously effectively communicate as a manager, owner and family member. These roles are difficult and each requires different skills, tactics and processes – to say nothing of

communication styles! Simply applying the best communication techniques from management to the family just doesn’t work, since the context and interpretation can be so different.

 

Given this complexity, the best advice on how to effectively communicate is by always applying the Golden Rule of family business:

 

All communication should be open and honest.

 

Applying the Golden Rule in your family business is the best advice for success in every situation since it reduces assumptions and builds trust. However, this is not easy work.

 

So how does a family business become a completely open and honest communication environment? First, we must develop processes that separate out the three main systems of family, management and ownership. In my work with family businesses, we spend the bulk of our time creating structures and developing habits to instill discipline so that family issues are discussed in a family setting and not on the shop floor, for example. Similarly, an ownership issue should be discussed only among owners, not with everyone in the family. Finally, management should be able to make decisions on a day-to-day basis without interference by non-working family members. Each system of family, management and ownership may have different rules or norms around communication that need to be understood and respected by all.

 

A good starting point is for a family business to gather the family on a regular basis – at least once a year – to discuss the progress of the business with the family and allow family members to ask questions. This would be the right communication venue for family members who are not involved in the business to get their concerns heard. There are many in the family who are affected by the business – spouses, for example, even if they do not own shares or work there – and it is natural for them to have questions. An annual family meeting can provide them the forum to get heard. A family meeting with open and honest communication is an excellent way to build understanding and improve communication in a family business.

 

In planning your family meeting, your goal should be to allow for as much interaction as possible. Here are a few points to consider in developing your first family meeting:

 

·         Develop a formal agenda and allow participants to add items to the agenda in advance of the meeting;

·         Determine the participants in advance and be consistent (e.g., at what age are children in the family invited as active participants?);

·         Provide an overview of past successes of the business over the last year as well as challenges in the business;

·         Acknowledge the sacrifices and efforts of all those that participate in the family meeting not just the family employees;

·         Make sure that you do not get too technical and speak in a business language that everyone will be able to comprehend.

 

Building an open and honest family business takes a great deal of dedication and effort, but the rewards are significant in terms of reducing conflict and miscommunication. When facing your day-to-day dilemmas with regard to your family business, you should also strive to be as open and honest as possible. It will not only improve the family business dynamics, but will likely lead to fewer problems in the long run.

 

 

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