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Family & Business = Oil & Water?

oil-and-water

They say mixing family and business is like mixing oil and water. Or do they say it’s like mixing oil and vinegar? Depends what they mean I suppose. And who are ‘they’ anyway? Oil and water can’t mix so I guess those ‘theys’ are saying family and business can’t mix, as if it’s a rule of science like gravity or picking up dropped food off the floor within two seconds being OK. Even then, we can still find examples of oil and water being productively associated. For example, in many commercially produced chicken nuggets, oil and water are significant components and they can coexist due to the inclusion of detergents which prevent the oil and water from separating as they are naturally inclined to do. So, that’s good. Mixing family and business is like mixing oil and water – it’s OK in the presence of detergent. This simile seems like a lot of work.

No one says mixing family and business is like mixing oil and vinegar. I just said that because it seems like a much more practical piece of imagery. If you take terrible olive oil and mix it with terrible vinegar, you’ll get a terrible salad dressing. If you take a good olive oil and mix it with a good vinegar, you’ll get a good salad dressing. Now we’re cooking (figuratively.) Lousy businesses plus dysfunctional families don’t mix well, unless you’re their receiver or solicitor, in which case, they’re probably lucrative clients. It’s similar to manufacturing the drug ‘P’ – it’s all about the quality of, and chemistry between, the ingredients. Now we’re really cooking (different kind of figuratively.)

Good salad dressings and good meta-amphetamines require good recipes. You can’t just chuck ingredients in the mix and trust dumb luck. Yet, that is what many people do when it comes to family and business. Any business benefits from clarity of roles, process and expectations – family businesses moreso. Yet many families hesitate to draw up some papers. Maybe it’s because it has the whiff of pre-nup about it? I’ve never been on either end of a pre marriage contract so I’m just speculating but I always assume it must be an interesting conversation to start. “Yes I’ll love you always forever but just in case…” Fifty percent of marriages end in divorce. We probably wouldn’t accept a toaster with that level of failure rate. At least you can return the toaster. Ironically, a common wedding gift is a toaster. Hopefully it’ll be one of those modern ones that allows for different settings because that’s one of the things you should found out before, “OMG, they have their toast on the lightest setting possible. That is effectively nothing more than warm bread. What else don’t I really know about this person? What else have they been hiding? My mother was right.”

If you try and Google search ‘families working together, you get a raft of results about how government departments can work with families to get them out of hospital, out of jail, out of debt or into jobs, into houses or into study. Government seems to focused on getting families into or out of things. It’s like all the government does is act as a huge doorman. (And just like a real doorman, you’ll find you get in and out a lot better, if you slip them a few sly dollars.)

A 2014 survey conducted by PWC internationally, and including New Zealand, assessed the state and intentions of family businesses compared to businesses generally. Eighty three percent had at least one conflict management process agreed in advance, This is good advice for businesses generally but essential for family members either in business together, working together, or just sharing a room. If you had a teenage daughter and a teenage son, and they co-purchased a car, they’d want a system pre-agreed for who gets it Saturday nights. Even when my kids were just out of car seats, they worked out an odd-numbered day / even-numbered day system for who got to sit in the front. (Those of you with multiple siblings from your own youth will have already raced ahead and done some maths, noting those months with thirty days and thirty one days. To ensure even more fairness, they did a six monthly switch on April 1st and October 1st. I don’t know what the future holds for my kids but that system of theirs fills me with some hope.)

That same survey raised hopes with the 83% then dashed them by revealing that only seventeen percent of family business owners had any kind of succession plan in place. There are plenty of issues arising when there is doubt and uncertainty over who gets what. The bible is full of them. What I found particularly interesting in the survey was that thirty six percent of current owners of family businesses intended to pass on ownership to the next generation but not management. Rightly or wrongly, and each case on its merits, I think all cases require forethought on the part of the elders and clarity on the part of the younger. It’s all academic to me – all I inherited from my forebears was terrible eyesight and skinny calves.

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