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How to avoid family-run business drama

With over 70 percent of all Aussie businesses owned and run by families, it’s vital policies and systems are put into place so a feud between family members doesn’t have the power to bring the business down.

According to Family Business Australia CEO Philippa Taylor, avoiding a bitter family feud in business can be as simple as implementing some clear governance practices, similar to what publically listed companies use.

“There have been several high profile cases of feuds in family businesses recently, which may have been avoided if plans and policies existed from the outset,” she said.

“It’s an important step to help get all the family members on the same page,” she added.

Kennard’s Hire, Haymes Paint, Wittner’s and Taylor’s Wines are cited as great examples of family businesses that have put in place systems and processes to look after the family interests as well as those of the business.

With this in mind, Taylor has created a list of 10 tips for running a successful family business and maintaining positive familial relationships.

1. Appoint one or more independent non-executive director to the Board of Directors: Independent non-executives bring outside experience and perspectives to the board, and can fill skill gaps in the family.

2. Establish a Family Council: This is a separate governance body that meets to focus on family expectations of the business. It is to the family what an independent board of directors is to a business.

3. Create a family charter: Also known as a code of conduct, or constitution, the family charter outlines what are and aren’t appropriate practices for family members working in the business.

4. Set position descriptions and key performance indicators for all members of staff, including family members: Setting clear roles, responsibilities and measures for each family member will help avoid disputes about performance and remuneration, like any other employee.

5. Establish a succession plan: Some 81 percent of family business owners intend on retiring in the next ten years, while only 41 percent of those intend to pass it on to the next generation. Even if handing the business over to the next generation isn’t on the cards, developing a plan and sharing it will help avoid future legal disputes.

6. Create an entry plan: Hiring a family member for a role they’re not qualified for is never a good idea. Create a set of criteria or achievements family members must fulfil before taking a role in the family company. Experience from outside businesses can equip a family member with valuable insights.

7. Ensure a will or estate plan is written up: It may be difficult, but always prepare for the worst. Outline how the family estate will be divided should something unexpected happen as it will help avoid bitter disputes between siblings.

8. Be proactive to resolve disputes: Don’t hesitate to establish a process or engage outside help should business and family relationships start to sour. If you wait too long, both business and family relationships suffer.

9. Avoid the courts at all costs: Try and settle disputes before they reach the point of needing legal counsel. The very nature of the court system is adversarial, pitting one family member against the other. It almost always damages the family relationship and has negative impacts on the business.

10.  Know when to walk away:
As the old saying goes, blood is thicker than water. Don’t let the business come between you and the family – at some point there has to be a point where you pack it in to preserve your family relationship.

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Lorna Brett

Lorna Brett

Lorna was Dynamic Business’ Social Web Editor in 2011/12. She’s a social media obsessed journalist, who has a passion for small business. Outside the 9 to 5, you’re likely to find her trawling the web for online bargains, perfecting her amateur photography skills or enjoying one too many cappucinos. You can follow her on <a href="https://twitter.com/#!/dynamicbusiness">Twitter @DynamicBusiness</a>

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