Family Businesses Can Be Extraordinary… With Good Governance
A recent article titled Family Affairs in this month’s Company Director magazine1 highlights research undertaken by Adelaide University as to the significant socio-economic contribution of family enterprises in Australia.
Family businesses account for 70% of all Australian businesses, employing half of Australia’s workforce.
Improving the performance of family businesses by just 1% will result in the creation of 35,700 to 48,000 new full-time jobs.
Improving the performance of family businesses by just 1% will add $5.8bn to $7.8bn to Australia’s GDP.
Professor Christopher Graves, director of the Family Business Education and Research Group, notes family business success hinges on robust governance, clear communication, and definitive purpose.
“When it comes to governance, family businesses must be very clear about why the family is banding together and continuing to pool their wealth. Once they understand that, they can start thinking about appropriate governance structures to help them keep on track to achieving their vision.”
3 case studies provided in the article highlight:
The importance of continuing entrepreneurship, expanding the business and innovation.
Establishing family governance frameworks – including family council, constitution and policies – to ensure sound collective decision-making.
The independent Chair of one family business, Rod Douglass FAICD, commented: “In family businesses, there is often a pretense of governance, as distinct from a courageous application of governance. The reality is, you’ve got to have thick skin to work with families, to tell them the truth all the time because they don’t necessarily want to hear it. Oftentimes, employees find themselves following a leader who has built an amazing family business, but they have no clue where they’re going, which means it’s hard for them to help. As soon as you document culture, people can debate it and ask how it defines what they should be doing. It enables you to unleash the creativity of the team.”
The difficulty of wearing so many hats in family business – family member, executive, director, shareholder – and the importance of havingstructures in place to address this circumstance.
The role of a board including independent family advisers and directors – Janelle Gerry MAICD, Managing Director of Macadamias Australia, states, “The board ensured we never dropped the ball on the business, and it was very much business as usual until the deal was done” (while a sale was occurring).
At Plarre Foods Group, one of Australia’s longest-standing bakery families with 80 bakeries and 200 employees, culture is underpinned by company values. “We have a strategy temple and the heartbeat it values,” says Steve Plarre, GAICD. “It moves down into our five-year goals, then breaks into our one-year plan and reset periods, where we set new targets for the next three months. Everything is tested against our values.”
Appointing executive staff in key positions to diversify risk and allow owners to lead a life outside work; and encouraging family to explore initial careers in other businesses and industries before working for the family business were also key strategies.
There are so many fabulous family businesses in our country that have achieved outstanding success, and from whom we can learn. There is now so much research and real-life examples suggesting that families that establish and implement disciplined governance structures and a values-based culture overcome the challenges in family business and achieve success over many generations.
Peter Debus is a Chartered Accountant (FCA), Chartered Tax Adviser (CTA) and a member and of the Institute of Company Directors (GAICD). He is a Director at PrincipleFocus.
1 Company Director, Susan Muldowney, Australian Institute of Company Directors, Volume 40 Issue 02, March 2024 page 56
by Pete Debus
