Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise
By Josh Baron and Rob Lachenauer
Harvard Business Review Press / 320 pages / $38
From the very first sentence on the first page, you’ll recognize this book’s relevance and value to a family farm business. The book can be best summed up by the following: “Your role in the family business will ask much of you — your intellect, your emotional intelligence, and even your courage,” but that very same business “can be fascinating, even beautiful” if you focus on the right things.
Owning, or being a part of, a family business is often what you make it. Is it aggravation and conflict, or happiness and harmony? It’s not hard to figure out which one leads to better business outcomes.
But is it possible to deftly navigate the complexity of a family business, decoding and leveraging the influence of key individuals, multi-dimensional relationships and system dynamics to “position it to thrive across generations”?
A family business is a team sport that requires a ton of work to sustain it. In the Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise, authors Josh Baron and Rob Lachenauer scrutinize the three traits they’ve identified that separate the best family businesses from the worst: curiosity, teamwork and adaptability.
They first examine the impact individuals have on the business and how the multi-dimensional roles each person plays with each other create blurred boundaries, unlike in non-family businesses.
Baron and Lachenauer say that “as an individual, you play an important role in your family business. Start by recognizing how you can be a better owner, future owner, member of the business family, trusted employee or adviser and how you personally can build better relationships.”
They also introduce the Four-Room model, a metaphorical framework designed for better decision-making. “Well-run family businesses funnel decisions to the appropriate room (Owner Room, Board Room, Management Room, Family Room), and family members and others play different roles and behave differently in each room.” They list which decisions should be made in each room, who occupies the room and has authority, and how the rooms should be integrated.
The benefit of the Four-Room model is that it gives management “the language to put back in its appropriate room any ‘helpful advice’ from non-operating owners or other family members, thereby enforcing important boundaries.”
And what would a family business book be without chapters on communication and conflict?
The authors explore what it means to not communicate with the next generation: “Successful family businesses foster a sense of stewardship of the business among all members of the family… If you shield the next generation from knowing about the business, you are failing to prepare them to be owners and good stewards. You’re also missing an opportunity to build their emotional connection to the business (and to each other), and you risk limiting how much of their passion and talent they will invest.”
As for conflict, they warn that “fake harmony” or “disagreement (that) is too cold” can lead to “quiet seething, a Pandora’s box of emotions waiting to be unleashed when opened.” They offer tips for moving to the “Goldilocks’ zone” of constructive conflict to get out ahead of issues most likely to cause a family feud.
There is advice to help in-laws thrive as “outsiders” and best practices for those already in the business to welcome these “disruptors’.’
There’s also a chapter on how to attract family talent and plan family career paths within the business, determine fair compensation, draft family employment policies, and prepare exit paths (including how to fire a family member). The chapter on business transition walks readers through the five steps of orchestrating the handoff and shows owners how to build a “glide path,” a five- to 10-year plan to move away from the business.
The ultimate communication and conflict take-away is that “(t)he value of relationships is hard to understate since they make so many other things possible, or impossible.” Furthermore, readers are counselled to not underestimate levels of trust and to “(t)hink of trust like a bank account that, with each interaction, you are either adding to or subtracting from through your behaviour. When your account balances are sufficiently high, you are generating three forms of capital that a family business needs to thrive: financial, human and social.”