Chapter 9 The Family Culture Family Business, First Edition, by Ernesto J. Poza Copyright © 2004 South-Western/Thomson Learning

9-2 Unhealthy Family Culture Characterized by  Secrecy  Lack of information  Absence of education Result of  Founding culture that supported autocratic leadership  Belief in benefits of privacy  Zero-sum dynamics

9-3 Zero-Sum and Family Culture Zero-sum dynamics characterized by exchanges in which one party’s perceived gain is the other party’s perceived loss Us-and-them dynamic can be triggered by any perceived difference: male–female, active–inactive, older–younger, etc.

9-4 Family Culture and Communication Family Business Continuity? COMMUNICATION, INFORMATION, KNOWLEDGE Family Culture/Family Unity? Organization Culture/Business Opportunity? Use of Management & Governance Practices

9-5 Family Councils... Provide reliable forum for delivering information about state of business Offer safe haven to teach family members rights and responsibilities of ownership Educate family members about estate tax issues and management of wealth Allow for policy making on issues such as participation, strategy, and liquidity

9-6 Makeup of Family Council May include direct descendants only Usually all adult family members, including spouses Children over 16 may attend Younger children may have parallel activities such as games or simulations

9-7 Benefits of Family Councils Build stronger families Re-commit the family to the business, which builds a stronger business Provide a family forum so members won’t all want to sit on board of directors Allow planning of future family participation Allow planning of future ownership and control of business

9-8 Benefits of Family Councils, continued Help the next generation manage wealth Preserve important family values, traditions, history, and knowledge about business Open up succession and continuity issues Professionalize the business Allow on-going problem-solving and conflict resolution

9-9 Family Unity and Continuity Family unity achieved through councils and assemblies good predictor of use of best business practices  Planning for continuity  Performance feedback  Succession planning disclosure  Advisory boards  Family meetings

9-10 Planning and Policy Making Family councils foster open and safe processes for sharing information Focus of family council should be conversations, deliberations, presentations Council may suggest policies such as  Employment and subcontractor policies  Board service and family council service policies  Dividend and liquidity policies  Family constitution

9-11 Guidelines for Policy Making Involve as many family members as relevant to current policy Look at the big picture Focus on the future Use experienced facilitators Agree on process to develop, review, edit, and enact policies

9-12 Conflict Management Family councils can provide forum for minimizing conflict Family councils can address problems such as  Frustration over lack of inclusion  Anger over unfairness of hiring practices, promotions, benefits, etc.  Frustration over dividends and lack of liquidity

9-13 Family Council Cautions Don’t bring together relatives who aren’t speaking to each other Don’t have first meeting during significant family conflict Start small, with direct descendants, and then graduate to spouses and children over 16 Consider inviting a facilitator Don’t use family meeting to rehash old conflicts or blame others for past actions

9-14 Plan a Family Meeting Decide who to invite Decide where to hold the meeting Decide if facilitator or other resources needed Work with facilitator to suggest agenda Develop structured agenda before meeting Develop a set of ground rules or code of conduct Include exercises and educational modules Schedule time for relaxation and family fun

9-15 Suggested Topics and Issues State of the business Development of family mission statement Development of family policies; e.g. employment Identification of policies or necessary legal documents Management of succession Development of next generation Estate planning Family strategy and business strategic planning Family communication

9-16 Family Office Enhances family’s ability to regulate relationship between family and company Provides and organizes services for family shareholders, including  Offering legal and financial aid with estate and tax issues  Managing investments and diversifying portfolios  Providing information to shareholders  Distributing family or shareholder benefits