I joined Family Business Magazine in 2000 — a generation ago. Over the years, I've observed young NextGens progressing in their careers, eventually taking over leadership in their family enterprises. I've kept tabs on family firms as they recovered from 9/11, the 2008-09 recession and the COVID-19 pandemic. I've seen families sell their legacy companies yet continue in business together as investors. I've reported on families who have hired their first non-family CEO and those who have taken their company public. I've seen them laugh, cry and fight.
In 2021, I stepped back from my duties as editor-in-chief to serve behind the scenes in a part-time supporting role as editor-at-large. Now, the time has come to take the next step. Effective Nov. 30, 2024, I am leaving MLR Media and heading off into the sunset.
Still surprising after all these years
Many people who have worked in the same field for a long time will tell you that little about that field surprises them anymore. Despite my long tenure here, there's one thing that still perplexes me: Why aren't more family businesses taking steps to institute family governance?
By “family governance,” I mean a family council and some written policies that are ratified by the full family, though governance work can go way deeper than that.
Of course, some families haven't embarked on a governance journey because they haven't learned what governance is and how it can help them. That is understandable. But what about the families who have heard about the benefits of governance but don't think it would be worth their while to do the work, or just never get around to doing it? Some of these families' businesses generate very high revenues. That means they have a lot on the line.
Governance can benefit your family if one or more of these statements applies to you:
Multiple family members want to work in the family business. What if some of those eager beavers lack the skills the business needs? What if highly skilled non-family employees are already serving in those roles? What if the business can't afford to employ a slew of relatives? Setting policies in advance will help family job-seekers manage expectations.
Some family members want to work in the family business, and some don't. Family shareholders who don't get a paycheck from the business expect a return on their investment. After all, a stake in a family company isn't like any other investment; shareholders are expected to keep their funds tied up in the business, even if they need cash for a house or college tuition. If the business doesn't pay a meaningful dividend, the non-employee shareholders are likely to become resentful.
The business is in the third generation or later (or will be there soon). Unless there has been a buyout, more generations means more shareholders, which means a larger group of people need to be comfortable with the moves the business leaders are making. Furthermore, in the third generation the family forms branches. Unless all the households have the exact same number of kids, some family members in Generation 3 and beyond will end up holding more stock than others. Steps must be taken to preserve harmony among the branches.
Family members don't always agree on everything. I'm sure this comes as no surprise. The more households there are, the greater the likelihood that there will be differences of opinion on politics or religious observance, as well as on topics such as business investments, HR policies and charitable giving priorities. How will the family manage — and honor — its diversity? Establishing a family code of conduct is a good first step.
Some family members don't know much about the business. Shareholders need updates on how the business is doing. But everyone should have some basic information about what the family business does, how it survived past challenges, how it serves the community and who the key non-family employees are. How should your family teach this information to the youngest generation and to married-ins?
There are in-laws. Speaking of married-ins, what does your family do to make them feel welcomed and included? If your family has a policy that mandates prenuptial agreements or forbids employment of spouses, or if you restrict share ownership to bloodline descendants, how do you explain this to engaged couples in a respectful way?
The family is geographically dispersed. Most people need a DNA test to find their third cousin. In a family business, third cousins could be business partners. But how often do they see each other? The best way to keep the peace among far-flung shareholders is to bring them together regularly for a gathering that combines information about the business, education on business or family topics, and fun activities for relatives of all ages. This involves a lot of planning and a sizable investment. But it is really worth it.
Yes, your family may hit potholes on the road to governance. Consensus building often involves hard work. But after the dust has cleared, long-term stability tends to emerge. We can provide information and connect you with resources and advisors as you venture down the governance path.
The friends you make along the way
I've had an eventful career here at Family Business. I've met family business owners from a wide variety of industries. I've chatted with wise advisors who've explained that while every family is unique, there are commonalities among their conundrums. I've seen firsthand at our conferences that hearing others tell their stories can help your family find its way out of whatever pickle you're in.
I've smiled on the sidelines as attendees have made friends; some have even joined each other's boards. I was honored beyond measure in 2022 when a report I wrote for this publication received the Grand Neal Award, the highest editorial award presented in business-to-business publishing — thanks to the business owners and advisors who candidly shared their views and experiences.
I've been lucky to work with talented and dedicated colleagues who are devoted to meeting the information needs of readers and conference attendees — and, now, podcast listeners as well. The Rock family, founders and owners of Family Business, care deeply about each other and about their business. This job has taught me so much about families, about business and about life. In a family business, the risks are high, but the potential rewards are vast. Working on your governance increases the odds that the rewards will continue.