Along with financial returns, engagement is one of the best returns a family can get from being part of a family business. Engagement engenders an emotional return, which just like a financial return is measurable and meaningful. Without an emotional return, the family will look at the business only for its financial performance.
Engagement means that the family has a clear understanding of what the business is doing and the business strategy and objectives. The family members are taking time out of their own personal lives and spending time learning about the business, making sure they have a strong family governance system or process. The youngest generation is very much involved in getting to know one another and learning about the business and the family in an age-appropriate way.
Engagement means that management shares what happens with the business, and the family has enough knowledge to understand the business opportunities and risks that the management presents to them. It means that there is transparency both ways between the family and the business. The family is high-enough functioning that the family council leaders don’t need to keep the rest family away from the business. And the family knows that when management talks to them about challenges and opportunities, they’re not asking for advice, they’re just sharing for transparency’s sake.
In line with that transparency, not every decision is a great one. The family understands the long-term objectives of the company and doesn’t get caught up in small issues or localized successes and failures. They see themselves as stewards of the business. They’re not thinking about how a specific decision is going to impact their quarterly or annual return. They’re really thinking about how each decision is going to impact their longevity as a family business.
In an upcoming series of posts, I’ll discuss the main ways engagement benefits and strengthens a family business.
- It helps a geographically dispersed family stay connected. If you’re part of a first or second generation family business, your shareholders may not be geographically dispersed yet, but that day is coming.
- Family engagement helps with next-generation development. In an engaged family, there are many more highly qualified family members to choose from when it’s time for succession planning.
- Engagement helps ensure the longevity of the family business by cultivating the youngest generation from an early age. It allows the business to plan for long-term growth because the family is also planning for long-term growth.
- Engagement throughout the year helps maximize the time together during annual meetings because everyone is already connected and up to speed on topics important to the business.
And finally, we’ll look at ways to build engagement through living out a family’s values–principles like transparency, inclusiveness, stewardship, education and relationships. We’ll look at the best ways to build engagement in a talented, multifaceted family when everyone has a really exciting job that keeps them busy all year when they’re not actively involved with the family business.
What would you like to know about family engagement? I’d love to hear your thoughts.