One of the most important tools family business owners need, to ensure their business is well run, is not what you might think. Although a board of directors, a strong management team or a family employment policy are all very important and are all good answers, the tool worth considering is an owner job description.
A sophisticated appreciation of what ownership is (and is not) is such a critical dimension for long-term success in family enterprise. Creating an owner job description should be at the top of your to-do list.
Having a job description for the CEO or other key positions in your business is important. The value of job descriptions in a business is widely understood. Job descriptions clarify the hierarchy of authority, establish accountability, ensure key tasks get accomplished and provide a mechanism for evaluating performance.
Job descriptions are constantly drawn up for the likes of middle to top management so why not consider the same for family business owners? The benefits reaped from such approach could be aplenty.
In the case of a management job description, the purpose is to clarify lines of authority and ensure that key tasks are accomplished, among other things. In the case of an owner’s job description, these criteria apply as well. An owner job description outlines who is accountable for key responsibilities in the oversight of the family business. Are owners responsible for day-to-day operations of the business? No. But, they are responsible for setting the vision and direction for the business. With respect to lines of authority, owners are responsible for electing directors, who in turn, are responsible for overseeing management.
In setting an ownership vision, questions that need to be answered include:
- How long do we want to own this business?
- What role do we want family to play in management of the business?
- What are the rules for who can own stock in the business and how ownership will transition from current to future owners?
- How much risk are we willing to take on?
- Do we aspire to diversify into different business lines?
- Do we expect to take money out of the business every year?
Beyond these vision questions, owners should also provide guidance on the values they would like the business to embody. Is creativity or entrepreneurialism important? Do we expect management to make a strong commitment to employees? Do we expect the organization to be involved in the local community?
In order to protect your investment, you must also ensure that you have the appropriate governance structure in place to oversee management. Owners must decide how the board of directors will be structured. What role will owners play on the board? What role will management play? Will you incorporate independent directors in the mix? How often will the board meet and what authority will it be given? And, owners have the responsibility for selecting the directors, typically on an annual basis.
Finally, in order to make all of the decisions described above, owners need to be well-educated. They need to understand their industry, the competitive environment and be able to read and evaluate financial statements. They also need to understand the unique aspects of businesses with a family ownership structure.
In summary, if you were to write a job description for yourself as an owner, it would be fairly short:
- Define the vision for the business;
- Clarify financial expectations to management;
- Articulate values that should be embodied in the business;
- Develop a strong governance structure to oversee management performance;
- Elect qualified board members;
- Understand the business context we operate in.
While the list may be fairly short, each of these responsibilities is incredibly important.
( All Statistical information and factual information presented in this blog has been obtained from an extract of an article from the Family Business Consulting Group based in Chicago)
At the Family Business Office we can offer you assistance in dealing with family business issues through incentives supporting advisory and mediation services. Contact us today on [email protected] or visit our website at https://www.familybusiness.org.mt/ for further information.