Lack of accountability is often a major cause of succession challenges within family businesses. Why not make the establishment of effective accountability the top priority on your New Year’s resolution list?
In cases where transitions are running into trouble, lack of effective accountability is frequently the cause. This can manifest itself in many ways. For example, parents are often the ones who administer and deliver the performance management feedback for the next generation. Unsurprisingly, this frequently causes conflict among and between generations. Why? Because family issues and emotions often end up overshadowing the performance management process. In some cases, a process is not even present.
A related example is compensation, which is frequently managed on a basis other than merit. We have seen clients where they have policies based on a concept of “equality”, others on the basis of gender or years of service. Such policies are often the causes rather than the cures of conflict. So, I encourage the senior generation to consider the following resolution for family accountability in the coming year:
- The owners, in collaboration with the Board of Directors, shall establish a written comprehensive participation policy for family in the business.
- What are the prerequisites to joining the company (education, experience, etc.)?
- What is expected in terms of on-going performance for family working in the business?
- Ownership shall develop an agreed upon Vision for the future of the business and owner expectations for the business. These will be updated and communicated to the Board of Directors in writing annually.
- Wherever possible family in the business shall report to non-family managers for performance management purposes.
- Family members shall be formally reviewed a minimum of semi-annually with the following guidelines:
- Wherever possible performance shall be measured on quantifiable and agreed upon written performance management objectives.
- An annual blueprint for personal and professional growth and improvement shall be established for each family member in the business.
- At each performance management review, each family member working in the business shall be given at least three areas in need of improvement and action plans to improve within those areas.
- Adherence to business culture and underlying family values shall be a regular topic within the evaluation process of each family member working in the business.
- Family member compensation shall be in accordance with established company compensation policy for the position occupied and performance within that position. Wherever possible such compensation shall be based upon position responsibilities and performance-based goals previously agreed to.