If you want your family business to survive, it’s best to draw lines between the three prongs of your family business; family, shareholders and employees.
“Each of these is an individual unit,” Remi Schmaltz told attendees at the recent meeting of the Canadian Association of Farm Advisors.
“They are separate units and they need to be viewed that way. There’s some overlap in them, but there needs to be some separation and understanding of how they relate to one another.”
Schmaltz is manager of corporate development at DynAgra and the fourth generation to work the family business. The Schmaltz family, who now specializes in crop inputs, began in the 1940s with a farm implement dealership located in Beiseker.
Defining the functions and roles of the family, shareholders and employees is critical in a family business, said Schmaltz, who has been working in his family business for five years and has management degree with a major in marketing from the University of Lethbridge.
Family relationships are both internal and external, since the family has relationships with employees, customers and community.
“I quickly learned when I joined the family business that there are small things you can do,” said Schmaltz. “I made a really conscious effort to split my family from business.”
For example, he started calling his father by his first name when he was at work. He said this small thing made a difference in how other staff and customers interacted with him.
Having clear values is important for a family business. Members of Schmaltz’s family business spent a lot of time determining what the family stands for and what they bring to the business as a family, he said.
An example of one of the values the Schmaltz family has adopted is making sure that their word is good.
Succession, in DynAgra, has had been strongly influenced by timing, he said.
“When someone’s ready to retire, who is there to pick it up?” asked Schmaltz. “When do you start that succession and what are the expectations between different family members and their roles?”
Schmaltz recommended holding meetings to talk about succession issues together in order to avoid assumptions of what will happen in the business.
The family component of the business has been the backbone, providing vision and support to the business on a strategic level as well as a recruiting ground, he said.
It is important to have formality in a family business, such as a shareholders’ agreement, and clear rules of engagement.
“It’s not that you operate off of these things on a daily basis, but these are things that you can fall back on when there is confusion,” he said. “Trust me, there’s always confusion in a family business to some level and it takes some understanding to get everyone back on track.”
Shareholders, including family shareholders, want a return on investment, both in the short and long term, and sustainability in a business. But family shareholders can forget that being an owner does not mean that they have a guarantee of employment or bonuses, said Schmaltz. People working in a family business should take positions that fit their qualifications, he said.
A big threat to family businesses can occur when the number of shareholders expands exponentially over generations, said Schmaltz. In these cases, consolidations may be necessary.
Employee shareholders need to be conscious of what they know as a family member, as a shareholder and as an employee; and separate these components. Understanding boundaries can make this precarious balancing act work.
Schmaltz said employees should be empowered and allowed to suggest changes to the business.
“Empowering employees makes it a really different business than if we were to push them down and tell them that they didn’t know what they were talking about,” he said.
This requires a balance of trust, pride and teamwork, he said.
The family and the shareholders create the foundation for the employee, and need to provide a vision and direction to employees, said Schmaltz.
In his business, said Schmaltz, they talk a lot about how DynAgra is a people business that is based on customer-employee relationships.
“Ultimately, it’s about how you provide service to them and how you provide value to their business,” he said. “Our business model has been that our customers’ success is our success.”