Don’t read this book if you run a family business that is flush with cash, growing like a weed, regularly enjoys drama free family dinners, has their succession plan for your grandchildren in order, and do not foresee any disruption to your business over the next few generations.
Assuming the above does not describe you perfectly, the Harvard Business Review | Family Business Handbook by Josh Baron and Rob Lachenauer is a comprehensive and useful tool for anyone involved with or working in their family business. Messrs. Baron and Lachenauer are cofounders and partners at BanyanGlobal, a global family business advisor group, and have decades of experience in family business consulting. BanyanGlobal is a thought leader in the family business advisory space, and when this group talks, we like to listen.
When we think about the important stakeholder groups in our lives, often the top of the list includes our places of work and our families. There are bookstores full of family cohesion books and best business practice guides: this handbook provides a comprehensive guide on the intersection and intertwining of these two stakeholders.
If you have read other Harvard Business Review books or “10 Must Reads,” you will be familiar with the format. Each chapter introduces a key concept, provides a roadmap and tools to address the concept, and summarizes the key takeaways for you to apply – all in 15-20 pages. Enjoy it with a cup of coffee, or if you are like me with two kids under three, in the recess of night when everyone is sound asleep.
The book is divided into three parts:
- Cracking the Code of Your Family Business: Understand the influence of individuals, relationships, and ownership on your family business across generations.
- The Five Rights of Family Owners: Determine your business type, governance strategies, transition planning, and communication strategies to develop the core of your business.
- Challenges You Will Face: How to handle and address family disruptions, conflict among family members, family employment policies, how to live with your wealth, and the pros and cons of a family office.
The authors remind us that, “Family and business are two of the most powerful forces in the world.” At its foundation, the Family Business Handbook provides an in-depth education for family businesses, not just businesses run by families. The challenges and opportunities that face family businesses are unique and advice often runs opposed to standard business advice. Add leverage to maximize ROE? Not if you are concerned with family control and are opposed to your family values. Triple revenue growth? Not if you care about work-life balance and have a different family mandate that’s not dependent on growth.
We’d recommend following the authors prompts and roughly analyzing your own company throughout the chapters. Who can own my company? Do we have a family employment policy? Is an outside CEO necessary? How do we bridge family branch gaps despite divergence? What’s our shareholder communication strategy? How do we arrive at a healthy level of conflict within the family that drives us forward? Why are we in business together?
I took more from some chapters than others, but a continual theme is the counter-intuitive opposition of “financial theory” against “family practicality and values.” One example highlighted this well for me. We excerpt the section below:
Because family companies face so little scrutiny from the outside world, it might be all too easy to take “just this once” baby steps down a path that can eventually destroy the values they hold dear. Radio Flyer’s Pasin recalls one such moment with his father, years ago, when he questioned his father’s decision not to use cheaper materials for one of the company’s trademark red wagons. “I remember my Dad making the decision whether to use a cheaper steel and a cheaper tire on one of our wagons years ago,” Pasin recalls. “And I said to my Dad ‘Does it really matter? Will consumers know?’ And my Dad said I’m not sure. But when in doubt, I like to overbuild stuff because I can sleep at night. There will be a lot of things you will lose sleep over running this business, but this won’t be one of them.’ I think about that every day. It’s one of the most important lessons my Dad ever taught me.”
My father-in-law, David, runs the family business my wife works in currently. He often reminisces about his father who founded the business and ran the company for 40 years. David, who ran the company with his dad as CEO, would ask why they don’t make a change to improve earnings and cut costs: “No one will really miss it and we will improve earnings.” My wife’s grandfather would simply retort, “Yes, but I will know.”
Family businesses have multiple objectives that both include, and extend beyond, dollars and cents. The Family Business Handbook is a timely reminder that none of these objectives can be pursued in isolation at the expense of the others. We endorse this book whole-heartedly for any family business and recommend it as a resource to keep on your shelf or to share at your next family business meeting with your shareholders.