“When I park the car at the factory, there’s a piece of gaffer tape they’ve put on the floor, I’ve got to walk from the gaffer tape all the way through to my office without talking to anyone at all. Apparently I keep interfering.”
That’s one approach an Australian family business has recently resorted to, to deal with the sticky issue of transition in the family company. And, Robin Buckham, CEO of the Family Business Australia hears plenty of similar war stories.
Business challenges vary, but in a family business, communication issues sit at the heart of many problems, and the solution says Buckham, lies in establishing governance mechanisms that allow for greater agreement and communication.
Vision and the Prince Charles problem
“There’s what we call the Prince Charles problem,” she explains. Different generations are ready with a new vision, doing things online, taking the business into China, for example, but they feel held up by the generation before them, a generation that were the entrepreneurs but are now luddites.”
“Family businesses need an agreed vision. And many of our members find that the value is as much in having the conversation and creating the vision as it is in the statement itself.”
Family businesses need an agreed vision. And many of our members find that the value is as much in having the conversation and creating the vision as it is in the statement itself.
There are 480,000 family businesses in Australia ranging from the local corner store to the Rinehart family’s Hancock Prospecting. They are a cornerstone of Australia’s economic development and employment base.
The Family Business Survey 2015 produced in partnership between KPMG and The University of South Australia found that 80% of family companies have experienced more conflict over the past 12 months than in the previous 12 months. The survey ranked friction over vision, goals and values as the number one source of conflict.
The elephant in the room that looms largest is the issue of transition: when will it happen, and what will it mean?
Creating a shared vision provides an excuse to bring everyone together to plan for the future and identify the issues before they become a problem. “It’s about naming the values – there’ll be there, even if you don’t like it. Naming the elephant is the first step to dealing with it.,” says Buckham.
In fact, the development of a shared vision for a family business and the associated mission and strategy can be the very thing that distinguishes outstanding family enterprise performance. Research has shown that family businesses outperform public companies on key dimensions such as stock price and return on equity, according to INSEAD’s Wendell International Centre for Family Enterprise.
The clarity a business creates when setting a vision is particularly important when the business includes managers from outside the family. If the family owners are not united, committed, and responsible, managers are constrained in their effectiveness. When owners are clear about their values and the direction, the business’ culture is stronger and this impacts positively on performance.