A family-run business will mean unique governance issues that can have a drastic effect on the future and success of your business. A lack of governance will inevitably lead to major organisational problems therefore it’s important to understand the risks of improper family governance and prevent them from happening in your family business.
1. A board of directors and a management team where each member understands their role within the organisation.
2. A clear vision and related business policies that tell individuals within an organisation how to behave.
3. Formalised interactions between governance bodies and key stakeholders.
4. The opportunity for open dialogue amongst key stakeholders (including employees) to discuss and tackle organisational concerns.
In a family business, family concerns and emotions often overlap with business concerns and goals, creating tensions and disagreement. Improper governance can arise from or be a result of these tensions and, because of family bonds, these tensions can be difficult to resolve.
Improper governance is linked to a lack of proper leadership and management processes which can leave a business vulnerable to a number of risks. These risks include:
No matter how small your family business, to avoid the risks outlined above and ensure good governance, your board and management team should ensure that there is: