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Keeping it in the family: 10 leadership lessons

Running a family business means not only do you need to manage relationships with family, but you also need to oversee leadership skills which may differ from typical values and traditions held by your family.

Strong leadership if the foundation of every successful business, and this is especially so in family businesses where the average tenure of a CEO is 17 years.

With this in mind, Family Business Australia CEO Phillipa Taylor is highlighting 10 leadership lessons for family businesses, which will be explored in greater detail at the National Family Business Conference in the Hunter Valley this August.

Lesson 1 – Parenting style vs. leadership style
Business owners have few notable examples of leadership to follow, many of them probably started their business to get away from leadership styles they didn’t like. . The challenge for family business comes when the benevolent dictator decides to retire and no one has been trained to make executive decisions. Children working in the business need to be allowed to make decisions and gradually take on the responsibilities of running the business.

Lesson 2 – Good governance ensures continuity
Good governance is essential for family business continuity across generations and is dependent on balancing both legacy and renewal. Dual governance structures of an independent board and a family council are instrumental in achieving this. While the board ensures the business is on track strategically, the family council ensures continuity of family ownership from one generation to the next.

Lesson 3 – Know your end game
Generational changes may be forced upon the family business as the result of a death or disablement of the existing owner. The possibility of this suggests that the family constitution and succession plans should be drafted and agreed upon well before you think you might need them.

Lesson 4 – Traditions, values and networks are conveyed at an early age
From a young age children watch the current leaders make decisions that reflect the values and culture of the business. This can be a major source of competitive advantage as values, traditions and even social and business networks are transferred from one generation to the next. The lesson here is that the old saying of “do as I say and not as I do” doesn’t cut it in family business.

Lesson 5 – Get an outside opinion
Growth and complexity of the business generally drive the shift to establishing a board of independent directors or hiring non-family executives. The shift to more formalised governance structures can cause stress as the founder experiences the pain of letting go, having their leadership challenged and being evaluated and held accountable for decisions and performance. Good governance structures make the business more attractive to external stakeholders, including banks and strategic partners.

Lesson 6: Open communication
Relationships are key to family business success. This includes relationships between family members and between family members and non-family employees. While family businesses may survive economic downturns and a competitive marketplace, conflict in interpersonal relationships can grind business to a halt and tear the family apart. Open and honest communication, a shared vision, common values, clear expectations and accountability can keep the channels of communication open.

Lesson 7 – Employing family – is it enough to share a family name?
While employing family members has many advantages including a built-in desire to see the business succeed, many family businesses fall into the trap of giving their family members key positions in their business without the proper training or experience. Giving family members positions that they are not ready for can be detrimental to both the individual and the business. Many family businesses require family members to have suitable qualifications or several years of professional experience outside the family business.

Lesson 8 – Compensating family members
Most families operate as socialists at home, but capitalists at work. This can be hard for siblings to reconcile when rewards are equally shared at home, but in the family business they are based on performance, merit and achievement. Compensating family members in the business needs to start with managing expectations, the best way to do this is to have a clear family compensation policy.

Lesson 9 – a big issue and a small issue
It’s important for family members to have an external sounding board that allows them to step back and get some perspective. With family and business issues intertwined, usual confidantes can be part of the problem. Family business forum groups provide a neutral place to let off steam and tap into insights from other families in business. Just like the oxygen mask warning you hear on aircraft – family business leaders need to invest in self-care first before they can meet the needs of everyone else.

Lesson 10 – Do not create two classes of employees
It is important to treat all employees equally and not favour family members over non-family members. Giving special treatment to family members, intentionally or unintentionally, can de-motivate employees.

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