This delay can greatly complicate
the task, Murak explains. “There’s a mathematical problem with family
businesses, and that problem is logarithmic: It’s the birth rate,” he says. “If
the founder has one or two children, and they have a couple of children each,
within a few generations, you wind up with significantly more people looking for
high compensation positions in this prominent family business. Then it is much
tougher to establish the criteria for entering and exiting the family business.”
If left too long, the welter of competing parties, each of whom may own a share
of the company’s equity, may make it impossible to reach a workable consensus on
these issues.
The Crucible
Devising a family creed can be a long process, and it
requires buy-in from the entire family. According to Murak, the first step is to
bring all the family members together, even those not employed by the business,
along with their spouses. “Now, you may think that is like assembling six kegs
of dynamite, all with very short fuses, but it’s done for a good reason—all the
members of the family, whether they are involved in the business or not, talk
about it all the time and are in some way involved with it,” he says. For
example, children who do not work in the family enterprise can still influence
it by lobbying their parents or siblings. “It’s best to start out with
everyone,” advises Murak. This family council then works to establish a
family creed. “The family agrees to criteria for entry, exit and the purpose and
role of the family in the business, and what do they want to do with the asset.
Do they want it to grow, and if so, do they want to fill it with family members
or the best people available in the market? How does all that happen, and how
are conflicts resolved—that’s all decided up front,” Murak says.
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