Franchising gives access to owning your own business, and those with an entrepreneurial spirit are attracted to the business model. Friends, spouses, siblings, parents, or other extended family join into partnerships to fulfill their business dreams. Partnerships are common and can feel supportive until a slight disagreement turns into a big problem for the business.
Often, unexpressed, and mismatched expectations are the root of most issues that arise. It starts off as a small annoyance, grows into resentment and then it just seems impossible to get on the same page due to different perspectives. Good news, most potential conflict landmines can be avoided through talking through common areas of mismatched expectations before they arise. The following are a few common areas we see partnership conflict arise due to different perspectives for how:
Family should be considered for employment, compensated, managed, developed and held accountable
Profits and cash are reinvested
Mission, vision, and core values of the business
Compensation is handled when one wants to work less than the other
Create transparency by taking time to dialogue about the possible, probable, and potential issues impacting the partnership relationship or the balance of family and business. The following are a few governance agreements we have facilitated to prevent disagreements.
Family Member Employment Policy. Establishes criteria for family members to join the business. Criteria can include but not be limited to: education, successful employment outside the family business, availability of an open position with a description, and prior training to qualify for an available position.
Compensation and Perks Policy. Establishes how family receives income from the business. Discuss the following to determine the guidelines:
Are family members paid based on the market rate for their position in the industry, or are they showing favoritism as a family member?
Are all family members paid equally or based on their role?
Are their raises based on family needs, or are they consistent with how every other employee gets a raise?
What special perks do they receive (such as airline or credit card miles)?
Do they get a company car or cell phone?
Are they shown favoritism when it comes to time off?
Advancement Policy. Establishes how family progresses as an employee, manager, and leader. Discuss the following to determine the guidelines:
What is the basis for family member employee advancement within the company?
Are they on the fast track to the executive suite, or do they have to earn their way?
How do you distinguish the differences between multiple family members pursuing the same leadership position(s)?
Family Member Performance, Behavior, and Attitude Policy. Establishes criteria for what is acceptable behavior, performance, and attitudes. Criteria can include but not be limited to: follow the Employee Handbook, fulfill responsibilities of the role, publicly support leadership.
Decision-Making Policy. Include in the Shareholders Agreement a section outlining the process for how critical decisions are made, such as changes in officer compensation, engaging in long-term leases, purchases above an expressed amount, and borrowing above a defined amount.
Stock Ownership Policy. The Stock Ownership Policy clearly defines if family members will receive stock in the business because they are a part of the family or what criteria must be met for them to have the opportunity to own stock.
Establishing rules and expectations clearly will support positive family communication and will eventually sustain the family business for generations.
Contact Us and we can help you with insights, and other resources, and see if it makes sense to work together. At the very least, in 30 minutes, you may get some ideas you can apply to your business right away.
Family and Business alignment is hard to find when business issues liven up family dynamics.
However; with proper process, governance policies, and mutual respect built over time, a Family Business can thrive through multiple generations. Click the following links for more drill-down resources on Family Dynamics and Family Governance.