It is a well-documented fact that 65% of all family businesses fail after two generations, and 90% fail after three generations. Not only does the business fail, but so does the family harmony, which is truly the sad news.
A recent study by The Williams Group of 3,250 families whose businesses failed in the second or third generation found four main causes:
1. Breakdown of trust and communication within the family: 65%
2. Failure to prepare the heirs for their roles and responsibilities: 25%
3. Lack of a family mission and vision: 10%
4. Estate and financial planning errors: less than 5%
While financial and estate planning are important, for most farm family businesses it’s even more important to engage in meaningful dialogue and conversation on a regular basis.This builds trust and communication and prepares heirs for their inherited wealth and responsibilities. This is difficult for farm families because they do not know where to start.
A starting point is to conduct well-organized and executed family meetings. A few components for successful family meetings include:
- Know in advance what you want to accomplish with the meeting. Is the meeting to describe Mom and Dad’s succession and estate plan to the family? Is the meeting to discuss business issues or relationship issues?
- Use an outside facilitator who is not part of the immediate family. This person should be able to handle both the “soft” side as well as the “technical” side of family business issues.
- Gather in a comfortable meeting location away from the home or office. Make sure the meeting space has the necessary supplies, such as a flip chart. Don’t forget snacks and beverages.
- Establish and stick to proven ground rules everyone agrees upon for conducting the meeting.
Some practical guidelines for conducting family meetings include:
- Prepare a written agenda. Start and end on time.
- Listen actively. Listening to understand is a skill to be learned.
Read “Crucial Conversations,” by Patterson, Grenny, McMillan and Switzer. This book provides a process for conducting conversations when the stakes are high and emotions run strong.
- Keep the welfare and harmony of the family uppermost. If harmony is threatened, decisions will be avoided.
- Only one family member speaks at a time. Don’t allow side conversations to take place.
- Everyone should be given an opportunity to speak.
- Seek consensus among the group, not just majority rule.
- Encourage everyone to make only “I” statements. Speak only for yourself, not “we always …”
- Don’t allow blaming or attacking others. Stick to the issues.
- Encourage everyone to talk about how they feel and what they think. Provide a safe environment where everyone can be candid.
- Combine different types of experiences to keep interest and participation high for the day.
Encouraging communication and trust through well-orchestrated family meetings are key to maintaining your family farm business and family harmony for generations to come.