7 Ways to Ensure Your NZ Family Business Success

Running a family business offers unique opportunities to build a lasting legacy while providing for future generations. However, mixing family dynamics with business operations creates distinct challenges that require careful navigation. Success depends not only on financial performance but also on maintaining healthy family relationships and clear business practices.

1. Define Your Family Values

The foundation of any successful family business lies in clearly articulated family values. These values serve as the compass that guides decision-making and shapes the company culture as it grows and evolves.

Start by gathering all family members involved in the business for meaningful discussions about what matters most to your family. This process should happen early in the business journey and be revisited regularly as circumstances change. Consider questions like:

• What principles guided the founding of this business?
• What do we hope to achieve beyond financial success?
• How do we want to be perceived by employees, customers, and the community?
• What legacy do we want to leave for future generations?

Well-defined values become particularly crucial as younger family members join the business. They provide context about the company’s origins, current purpose, and future aspirations. This understanding helps new generation members appreciate the business’s significance beyond just profit margins.

Family values also create stability during challenging times. When difficult decisions arise or conflicts emerge, returning to core values helps maintain perspective and guides the path forward. They act as a unifying force that keeps the family focused on shared objectives rather than individual interests.

2. Develop a Comprehensive Succession Plan

Even in the early stages of your family business, succession planning should be a priority. A well-crafted succession plan ensures business continuity and helps preserve both the company and family relationships when leadership transitions occur.

Succession planning involves more than simply choosing who will take over. It requires:

Leadership Development: Identify potential successors early and provide them with diverse experiences within the business. This might include rotations through different departments, external education, or mentorship programs.

Skills Assessment: Evaluate the capabilities of potential successors honestly. Sometimes the best candidate may not be the most obvious choice. Consider leadership abilities, business acumen, and commitment to the company’s values.

Timeline Creation: Establish realistic timelines for transition phases. This allows current leadership to gradually transfer responsibilities while successors develop necessary skills and confidence.

Financial Planning: Address how ownership transfer will be funded and structured. This includes considering tax implications, estate planning, and ensuring the business remains financially viable during transition periods.

Communication Strategy: Keep all family members informed about succession plans to avoid surprises and reduce potential conflicts.

3. Maintain Open and Honest Communication

Effective communication forms the backbone of successful family businesses. However, the informal nature of family relationships can sometimes work against clear business communication.

Establish regular business meetings separate from family gatherings. These sessions should focus exclusively on business matters, strategic planning, and operational issues. Create structured agendas and stick to them, avoiding the temptation to drift into personal family discussions or minor disputes.

Key communication practices include:

Regular Updates: Keep all family members informed about business performance, challenges, and opportunities, even if they’re not directly involved in daily operations.

Conflict Resolution Procedures: Establish clear processes for addressing disagreements before they escalate. This might include designated mediators or specific protocols for handling disputes.

Decision-Making Protocols: Define how business decisions will be made, who has authority in different situations, and how input from various family members will be incorporated.

Performance Discussions: Address performance issues promptly and professionally, just as you would with non-family employees. Avoiding difficult conversations because of family relationships often makes problems worse.

4. Separate Home and Business Life

One of the most challenging aspects of running a family business is maintaining appropriate boundaries between personal and professional relationships. When these lines blur, it can negatively impact both business performance and family harmony.

Physical Separation: If possible, avoid conducting business discussions at family gatherings or in the family home. Similarly, try to keep family matters out of the workplace.

Role Clarity: Clearly define each family member’s role within the business hierarchy. When someone is acting as the CEO, manager, or employee, their family relationship should not override their professional responsibilities or authority.

Professional Standards: Hold family members to the same standards as other employees regarding punctuality, performance, and accountability. Nepotism or special treatment can damage morale and business effectiveness.

Time Boundaries: Establish specific times when business discussions are appropriate and when they should be avoided. This helps preserve family relationships and ensures business matters receive proper attention in appropriate settings.

5. Seek Outside Perspectives

Family businesses can sometimes become insular, with decision-making influenced more by family dynamics than sound business principles. Bringing in outside perspectives can provide valuable objectivity and fresh insights.

Consider establishing an advisory board with independent members who bring relevant expertise and can offer unbiased advice. These advisors can help with strategic planning, succession decisions, and conflict resolution without the emotional baggage that family relationships sometimes carry.

External consultants can also be valuable when facing specific challenges such as:

• Strategic planning and growth initiatives
• Organizational restructuring
• Performance improvement
• Technology implementation
• Market expansion

Professional advisors like accountants, lawyers, and business consultants who specialize in family businesses understand the unique challenges involved and can provide targeted guidance.

Learn more: Independent accountability and your business

6. Strengthen Family Relationships

The strength of family relationships directly impacts business success. When family bonds are strong, trust levels are high, and communication flows more easily. Conversely, family conflicts can quickly spill over into business operations.

Regular Family Time: Schedule regular family activities unrelated to business. This helps maintain personal relationships and reminds everyone that family bonds extend beyond business interests.

Team Building: Organize periodic team-building activities that allow family members to work together in non-business settings. This can help improve communication and strengthen relationships.

Conflict Management: Address family conflicts promptly before they impact business operations. Consider family counseling or mediation if necessary.

Shared Experiences: Create positive shared experiences that reinforce family unity and shared purpose. This might include volunteer activities, travel, or celebrating milestones together.

7. Document Everything in Writing

One of the most common pitfalls in family businesses is relying too heavily on verbal agreements and informal understandings. The comfort level that exists within families can lead to casual approaches to important business matters, which often creates problems later.

Employment Agreements: Even family members should have written employment contracts that clearly outline roles, responsibilities, compensation, and performance expectations.

Ownership Documentation: Ensure all ownership interests are properly documented, including how shares can be transferred, sold, or inherited.

Operating Agreements: Develop comprehensive operating agreements that address how the business will be managed, how decisions will be made, and how conflicts will be resolved.

Compensation Policies: Establish clear, written policies regarding compensation for family members, including salary, bonuses, and benefits. This helps prevent misunderstandings and ensures fair treatment.

Exit Strategies: Document what happens if family members want to leave the business, including procedures for valuing their interests and facilitating their departure.

While it might seem excessive to formalize agreements with family members, clear documentation actually protects relationships by eliminating ambiguity and preventing misunderstandings.

Conclusion

Success in family business requires balancing the benefits of family involvement with professional business practices. The seven strategies outlined above provide a framework for navigating this delicate balance. By establishing clear values, planning for succession, maintaining professional standards, seeking outside input, strengthening family relationships, and documenting agreements, family businesses can thrive across multiple generations.

Remember that family business success isn’t just measured in financial terms. Preserving family relationships, creating opportunities for future generations, and building a positive legacy are equally important outcomes. With careful planning and commitment to best practices, family businesses can achieve both financial success and family harmony.

The key is recognizing that family businesses face unique challenges that require specialized approaches. By acknowledging these challenges and proactively addressing them, family business owners can build enterprises that not only succeed financially but also strengthen family bonds and create lasting legacies for future generations.