In this issue
When it comes to running a family business over the long term, there are myriad ways that things can go wrong, such as product failures and external economic shocks. But often the reasons that a family succumbs to the “shirtsleeves to shirtsleeves” curse come down to basic financial mistakes.
Here’s a look at some of the more common money mistakes that family businesses make — and guidance on how to avoid them.
Mistake #1: Taking an ad hoc approach to dividend decisions.
You've likely read by now about the 33 million or so Americans who have quit their jobs since last spring in a phenomenon commonly called the “Great Resignation.” A research study by the Predictive Index found that an astounding 48% of employees have recently thought about leaving their jobs. These are big numbers. And while family businesses have historically done better at retention than non-family firms, now is a great time to take a look at why this is — and to double down on those strategies.
In the past 18 to 24 months in my role as a family wealth educator and coach, I have increasingly seen individuals across generations struggling with and trying to redefine meaning and purpose in their current life. Certainly, the global pandemic has triggered this in many of us. However, for family members who have access to an abundance of resources, this issue involves both a unique challenge and an opportunity.
Eventually, your family business will grow to a point where you realize you need help setting its strategic direction. To provide a reality check on your vision and performance, you need an unbiased view. Most leaders create a board to help with these issues.
So, what is the first step in building a board? Let’s begin by defining the different types of boards so we can find the right fit for you.
BOARD OF DIRECTORS (BOD)
When the Caladan family gathered for its biannual shareholder meeting, there were a number of significant topics to discuss. The most important was a clarification of some items in the buy-sell agreement. Prior to the meeting, each family shareholder had access to a digital version of the family constitution. Everyone was expected to be prepared to discuss the topics on the meeting agenda. The family council had printed relevant family documents for reference during the discussions.