Business System

An Effective Business System
Is Critical for Family Businesses

An effective business system is just as important for the family business as for any other business. However, families run the risk of bringing behaviors from their family system into the business and mixing the two. This can happen without any great or dramatic warning but, like carbon monoxide, it can be lethal. So, we keep a careful watch for signs of this happening.

Membership / tenure

People are included in the business system only after it has been determined that there is a legitimate business need for the role and the person has been selected for inclusion. Membership exists only so long as there is a business need for the role and is always contingent upon satisfactory performance.

Authority

There is a single entity with final authority (e.g., owner, CEO, board of directors) and all members are ultimately responsible to this person or body.

Decision making

Decision-making authority is clearly defined and consistent.

Reporting relationships

Each person in the business system has a clearly defined reporting relationship to a boss (best if a single boss) and others in the organization. Relationships must be strictly adhered to.

Job definition / roles

There is clearly defined reason for the position to exist (i.e., it exists to support the organization) and a set of tasks to be performed, based on fulfilling the organization's needs. The relationship of each job to other jobs in the business is clearly delineated.

Priorities

There is a uniform, long-range goal for the organization. All units (e.g., divisions, departments, people) make their plans solely to further this goal, subjugating their own needs if necessary.

Goals / performance evaluation criteria

Formal goals are clearly defined and established at the beginning of each planning cycle with the purpose of supporting the organization. People are held accountable for meeting their goals, and there is a formal evaluation of performance and feedback is given. Rewards and/or punishments are directly related to this evaluation.

Rewards

An effective business system emphasizes compensation or greater authority/autonomy.

Longevity

The organization will exist only as long as the business exists, but the goal is to keep the unit together and going indefinitely.

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