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Welcome Bringing harmony o business amilies n CAROLYN COLE S weal h crea ors and heir amily members pursue grow h and fnancial s abili y rom genera ion o genera ion, business amilies o en fnd in er amily ensions aring in o con ic ha can las decades. In mos cases his undesired ension comes a a nega ive cos o he business i sel and has a risk o des abilizing he fnancial ecosys em hose same amily members rely upon. However, care ul planning, clear communica ion, and a commi men o coopera ion around a shared purpose may help mi iga e he risk o con ic . Tis is a conscious journey or a amily which involves work, however he resul rom his process is priceless o mos amilies.
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Business family conflicts are typically attributed to communication issues Con ic s ypically s ems rom some level o communica ion breakdown wi hin a amily. One o he grea es challenges or amily members is o unders and wha each person is en i led o know and wha si s ou side o heir au horized scope. Tis can be con using or a varie y o reasons. Firs ly a amily member is no necessarily an owner, and even i he or she is a shareholder, ha does no au oma ically mean hey are privy o day- o-day opera ing decisions wi hin a business. Secondly, here are o en expec a ions o employees and communi y members, ha because a person is a amily member, he or she will have access o in orma ion or can in uence decisions a he business leadership level. Tis can be ar rom he ru h. Addi ionally, con ic may arise when a amily member who is an employee o a company has in orma ion in advance o o her non-employee amily member shareholders. Te ques ion o , “why wasn’ I old abou ha ?” can crea e he impression ha here are insiders and ou siders in he communica ion channels. I can also be very embarrassing or amily members o learn abou business decisions rom media releases or company employees.
In a business amily con ex , e ec ive governance means clari ying he roles and responsibili ies o he amily members involved in he business, o crea e an inclusive environmen and ensure each genera ion and each individual unders ands heir “lane” and why hey’re in i . A proper governance s ruc ure makes i clear who in he amily makes a paricular decision, as well as how, when, and why hey do so—and who needs o know abou i . I should also es ablish a mechanism or resolving dispu es and provide a roadmap or amily members who wish o exi he business, should hey wish o. No one like he eeling o being in a locked room. Jus knowing here is an exi op ion, provides all amily members he oppor uni y or di eren decision making processes.
The path to harmony begins with creating a process
Establishing—or improving—a family office can support better governance
One o he mos e ec ive ways a business amily can reduce he likelihood o con ic and crea e harmony hroughou he amily ecosys em is by in roducing a s ruc ure and process around communica ion and decision making. Many people re er o his as “governance”.
A “ amily o ce” is a group o pro essionals (accoun an s, lawyers, weal h managers and more) who come oge her o in egra e in orma ion abou he business amily and develop clear processes around communica ion and decision making. A amily o ce can be invaluable in helping business amilies improve
organiza ional governance and build grea er harmony hrough he amily i sel . o es ablish a amily o ce or evalua e an exis ing one, ake s ock o he pro essionals already advising he amily. Tis should include no only hose advising amily members in charge o running day- o-day opera ions, bu hose suppor ing o her amily members who have a direc or indirec in eres in he amily business. How well do hese myriad pro essionals work oge her? Are hey communica ing e ec ively? I no , ha could be a key ac or con ribu ing o any amily discord, as he recommenda ions single amily members receive, may no be aking he en ire business—or amily—in o accoun . An e ec ive amily o ce mus comprise pro essionals willing o embrace eamwork and priori ize he business amilies’ in eres s over heir own. All oo o en, business amilies fnd heir pro essional advisors compe ing or a grea er share o he amily “pie”; his ongoing compe i ion can inhibi eamwork and lead o con ic down he road. Te same is rue or pro essionals working or he amily’s business(es) ra her han he amily i sel —a lack o communica ion be ween hese advisors and hose o he amily o ce can make i di cul or amily members o know wha
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WESTERN SYDNEY BUSINESS ACCESS NOVEMBER 2019
hey need o know, when hey need o know i , in order o make he imely and e ec ive decisions. o allevia e con ic and os er harmony, business amilies should inves in experienced pro essional advisors ha are willing o work oge her and who bring an unbiased, impar ial perspec ive o he maters o he day. Tey need advisors who can clearly ar icula e he impac o a decision on he business—and on he amily members hemselves—coordina ing e or s in order o con inually move he amily business, and he amily’s own plans, orward. Any hing less is simply unaccep able.
Avoid business family conflict with better governance and communication Con ic may be an all oo common ea ure o business amilies, bu i doesn’ have o be. An e ec ive governance s ruc ure, suppor ed by a well- unc ioning amily o ce, can provide he clear communica ion needed o mi iga e he risk o amily con ic and build a grea er sense o harmony across bo h he amily and he business. First published by Carolyn Cole, Vice President, Family Office for KPMG Enterprise in Canada, on kpmg.com
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