No two family businesses are the same. They each have their own unique mix of family dynamics and business challenges. The dynamics and challenges also aren’t static and change over time depending on the maturity of the family and the business.
However whilst all family businesses are different, they are also the same. There are predictable family business events or scenarios which the family will need to address as the family and the business grow.
This is why we strongly advocate to family business clients the importance of transition and succession planning, in concert with pre-agreed family rules, to pre-empt how the family will deal with the predictable events or scenarios if - but more likely when – they occur.
One of our family business clients put it best when he addressed his siblings in one of our family governance workshops.
“No surprises... we need to discuss and agree now, so that when something like this happens, this is how we will deal with it”.
It’s what we often refer to in our family business workshops as the ‘what if’ and ‘what happens when’ scenarios.
Whilst far from an exhaustive list, family businesses need to plan and agree on rules around:
As you would expect, if these scenarios aren’t planned for – and clearly communicated to family members – they can cause underlying tension or open conflict within the family. This distracts the family to the detriment of family relationships and ultimately the success of the family business.
We are not suggesting that there won’t be disagreements and tension along the way. But by planning and having clear rules, the family is far better placed to lessen the chance of tension and conflict ‘paralysing’ the family. The family will also be best equipped to constructively manage change.
We are often asked, when is the right time to plan and what size does the family business need to be? Based on our experience, the challenges of family business aren’t limited to ‘large’ family businesses. Also, planning under ‘harmonious and calm conditions’ leads to far better outcomes. People rarely make well considered choices in the middle of a ‘crisis’, and it is hard to implement rules retrospectively – i.e. it is very important to establish plans and rules well after the ‘horse has bolted’.'
The old saying ‘the whole is greater than the sum of the parts’ aptly applies to the three core elements. Working in unison they generate strong and effective family governance to deliver:
© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.