Family Business 101 #5
“The Family Doesn’t Care About the Business”

  • It is important to have a communication strategy for communication within members of a family business.
  • Cadence is very important
  • Maintaining continuous, effective communications helps to avoid and resolve disputes, creating clarity

The plucky state bank had performed steadily over the years in its northern region.  The founder saw the opportunity to grow and began making plans to expand the bank’s footprint.  Competitors were wary of the little bank and opposed their efforts to build a branch bank in the neighboring county in which they had primary operations.

In response to the resistance, the founder decided to put a branch right at the county line.  The competitors sued – and prevailed in court.

The story might have gone predictably, but the founder suffered a heart attack and passed away unexpectedly.  There were sons and daughters of the founder who were major shareholders, but none were available to take over as the head of the bank.  The Board, which included the widow and another family member, decided to hire a professional manager from the outside.  As an old-fashioned Irish American family, they didn’t share a lot of information, even among family members.

Unfortunately, the new management team did not perform as hoped and the competing banks, seeking to deal the upstart a final indignity, launched a hostile takeover.  With the founder now gone, the competitors were circulating rumors that the family “doesn’t care about the bank anymore.”

The family faced a crisis:  The founder’s children, who all lived remotely, needed to clearly demonstrate to the outside shareholders that they were as committed as always to the interests of the bank.   One of them was asked to give up his career and step up to a leadership position at the bank.  Although he and his family lived far downstate, he commuted up north for two years so that his son could graduate from the high school where he had begun. 

The family realized that they needed a better, more regular way of communication that would ensure a steady flow of information throughout the leadership and the family members.  The other family members came from all over the country to attend a series of shareholder meetings to answer questions and display their support for the management of the bank.

The outside shareholders decided to remain with the family management approach.  Their patience was well rewarded:  Because of the support created by the new communications routines established within the family, the new CEO and his team formulated outside-the-box approaches to solving their expansion challenges.  Ultimately, the bank applied for and was granted a national charter, shifting jurisdiction from state law, and placing it under the federal regulation. The Comptroller of the Currency then authorized the bank to open an operation in the neighboring county seat; this put their headquarters squarely amongst all the competitors’ banks.  The aggrieved bankers sued again, claiming that the matter had already been settled in state court with the prior lawsuit.  However, as this was now a federal matter, the Comptroller’s rules applied, and the bank was free to continue operations in the new locale. 

The family remained closely connected thereafter, communicating regularly in advance of quarterly and annual meetings.  The bank flourished, opening several new branches in the surrounding counties, and grew into the major financial services company in the region.  Because of its impact in the area, many years later, the bank attracted the attention of and merged into a larger multistate banking corporation at a significant premium.

In my thirty plus years of working with businesses, I have never encountered an organization that believed that their communications needed no improvement.  This is especially true for businesses where family members are involved in an enterprise and need to have effective communications both among those in management and those outside.  Here are some suggestions for maintaining healthy intra-family clarity and information-sharing.

  1. Senior Leadership Meetings – Whether a family business or not, senior leadership needs to meet on a regular basis to spend time “On” the business, instead of “In” it. These meetings are not operational and tactical.  They should focus on strategic issues that impact the enterprise.  When these are coupled with family-specific concerns, it aids greatly to ensure alignment.
  2. Senior Team Development – Whether in conjunction with the above meetings or not, these meetings are not what is traditionally considered “Team Building.” These meetings require a focus on developing the notion of the “first team” as described by Patrick Lencioni.  The senior team, especially if populated with family members, needs to spend time working to deepen the trust and loyalty among the members.  This can (and probably should) include tackling sensitive improvement topics raised among the members about the members.  This could be likened to an orchestra members’ meeting (possibly without the conductor) to discuss ways the members can improve their play so that the product yielded delivers improved results.
  3. Family-Centric Meetings – These meetings, perhaps not as frequent as those above, are intended to keep all family members, whether in management or not, apprised of the performance and general direction of the enterprise. This type of meeting is used to keep everyone abreast of the current environment in which the enterprise operates and to point out the intended longer-term vision to help maintain continuity.  This kind of gathering can have the tone and feel of a shareholders’ meeting but is limited to family members to maintain clarity and momentum for management.

Clarity in communication reduces the opportunity for family enterprises to get caught “on the back foot” as occurred in this case study.  Instead, it creates a clear roadmap for the enterprise and its members; this invariably reduces surprises, unexpected friction and leads to higher performance.

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