Attention to Sound Financial Practices -and to Sharholder Value – are what Separate the Best from the Rest
by François M. de Visscher
Why do some family firms thrive while others merely survive or even wither away and die? Many reasons, of course. However in my experience, successful family firms are distinguished by their attention to sound financial strategies and practices. To borrow a phrase there are seven financial habits in particular that separate the best from the rest.
1. Successful family firms establish effective financial and governance structures that separate family issues from business issues.
Family councils, family holding companies, shareholders’ assemblies where such forums exist, family members know there is a time and a place to discuss family matters related to the business. The board of directors can then focus on strategic issues and the pursuit of long-term shareholder value. Its time is no longer consumed by family issues (and sometimes quarrels) that should be resolved elsewhere. Likewise, when such structures are in place outside board members can be more easily selected on the basis of “functional fit” – that is, on experience and vision that complements that of the family board members, rather than on just a friendship or social obligation. Outside board members often add value because they come from backgrounds in public companies, where maximizing shareholder value is a primary mission. More…