The Rules of Engagement Around the Family Business
If Hollywood has taught us anything, it’s that family business can be a messy affair. From Logan Roy’s brood on Succession to the Duttons of Yellowstone to the Bluth family in Arrested Development, there’s no shortage of nightmare family empire tales that paint an ugly picture of family and business.
Despite these dramatizations, family enterprises can be incredibly rewarding. The intimate trust between family members often enables quicker, more efficient decision-making. Families passionate about the same vision can combine unique skills and resources to create a thriving venture. However, navigating the often choppy waters of a family business requires strong rules of engagement.
Establish a Family Charter
WealthCo’s Senior Planner, Ryan Mackiewich, CPA, CA, FEA, advises that one of the first steps for a family business is to establish the rules of engagement, starting with a family charter.
“Much of the potential conflict within family enterprises boils down to values and purpose. Conflicts arise when actions are not aligned with the family’s values and purpose. A family charter, a governance document that codifies these values and purposes, provides tools and guidelines to maintain long-term peace and order.”
This charter should clearly outline the rights, roles, and responsibilities of each family member involved in the business. It helps prevent misunderstandings, confusion, and resentment, promoting fairness and fostering a strong foundation for future growth. While terms like ‘governance’ and ‘charter’ can seem complex, the goal is to create a clear, simple document that all family members can understand and implement in their daily lives.
Maintain Your Identity as a Family
In family-run businesses, maintaining a separate family identity is crucial for success. Losing sight of what matters most can threaten the long-term viability of the family enterprise.
“It’s important to maintain that family identity separate from the business,” Mackiewich suggests. “Whether it’s an annual ski trip, Sunday dinners, or a regular game night, carving out time to be together as a family is critical.”
Set Boundaries and Communicate Clearly
Family businesses have an inherent advantage as family members relate to one another in ways that build trust and enhance efficiency. However, this can be undermined if clear communication is not practiced.
“The inability to properly communicate is a common issue in family businesses,” Mackiewich shares. “Families often have established communication patterns filled with stress and boundary issues. People may feel they don’t have equal voices, and conversations can be dominated by certain family members. We tend to revert to our childhood roles when we get together with our families.”
Establishing strong communication ensures everyone has a say at the right time and in the right way. Clear channels of communication help manage complex dynamics and achieve common goals.
Address Generational Challenges Upfront
Generational challenges in family-run businesses can be daunting. As generations pass, business operations need to evolve to keep up with societal changes and trends.
“Healthy communication and honest dialogue are key,” Mackiewich emphasizes. “Coupled with an open mind to generational changes and a willingness to learn as you age. Societies change, and if you want a respectful relationship with your children and grandchildren, you need to be able to discuss what’s important to them.”
Realize that solutions don’t always need to be complicated. Embracing innovation, leveraging expertise, and staying organized can ensure success across generations.
Reaping the Rewards of these Rules of Engagement
Laying the groundwork for a thriving family business can yield abundant rewards. Consider Kal Tire, a Canadian family enterprise success story. Founder Tom Foord started Kal Tire as a single service station in Vernon, BC, in 1953. Today, it is Canada’s largest independent tire dealer, with 260 retail and commercial stores across Canada and a global presence in mining tire services.
Kal Tire’s success is attributed to a culture of collaborative decision-making, maintained by Foord’s family, which has led the business through generations.
Could Your Family Business Benefit from Expert Advice?
Our Integrated Advisory Community includes Family Enterprise Advisors (FEAs) who have extensive experience in advising family businesses. Reach out to your accountant to connect with the right resources.
About the Author
Ryan Mackiewich, CPA, CA, FEA, is a Senior Planner with WealthCo and a member of our Integrated Advisory Community. With over 25 years of experience providing tax and business advisory expertise, Ryan also holds the Family Enterprise Advisor (FEA) designation. When he’s not working with business families, Ryan enjoys camping, hiking, and exploring the world.
If your family-run business could benefit from expert advice and support, contact us today. WealthCo is here to help you navigate the complexities of family business with confidence and clarity.
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.