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The Importance of Family Business Policies

In a family business where the founder/owner is still in charge, decisions around ownership, employment, compensation, and governance are relatively uncomplicated and typically unchallenged. It is a work environment where the decision maker is not held accountable for strategic or operational choices for the most part.

However, when the junior generation(s) becomes involved in the form of sibling and cousin teams, it is difficult to escape the complexities that come with diverse personalities, values, and perceptions of what vision is best for the business and the family.

Policy development emerges as a necessary process when the business grows and multiple generations become involved. Ownership changes prompt junior-generation members to feel the need for some established parameters that will guide decision making but also create some degree of objectivity around their choices.

Our experience has shown that family business polices need to emerge from the values, beliefs, and principles of the family. In addition, an inclusive decision-making environment must exist in order to gain buy-in around policies. An employment policy, for example, prompts family members to examine and reconcile their opinions around a number of issues, such as what criteria must be met in order to work in the business, how family members will be appraised and held accountable, how they should be compensated, and what happens if they do not meet expectations. These are important issues, and building consensus around them can be difficult and emotional.

Families gain enormous benefit from the development of policies that will shape their interaction around critical issues in the business. Formal policies also help the family learn to communicate, to lead, and to send a message to employees that expectations must established, communicated, and adhered to in a professional work environment.

Kelly LeCouvie is an associate with the Family Business Consulting Group, Inc.®

 

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