Family Business Training - Session No.5

1. Effective Communication and proper
Information flow in Family Businesses
Silvan Mifsud, Chairperson Family Business Committee
THE MALTA CHAMBER
OF COMMERCE, ENTERPRISE
AND INDUSTRY

2. Whatinformation do we need and why?
Family Businesses need to be data driven organisations as much as possible.
Increasingly, family businesses must come to recognise and appreciate that data is a
business asset that flows through their organisation and managing the complexity of
that asset is a way of delivering business value. To have that business value delivered
they need to :-
• Understand what kind of business insights the data can provide and hence choosing
the right metrics to track things.
• Understand the value and return on investment of their business operations
• Translate the results of data analysis into action items & decisions
• Having ways to track the effect of decisions taken to address the issues at hand.
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3. From where do you Get Started?
At the end of the day, any family business owner should knows his or her
business better than anyone else. So to get started, you ideally identify a
situation or a problem as a starting use case. It is recommended that being
the first, you choose a use case that can be easily measured. Otherwise,
you will hit a wall because you will not know where you can get the data
from.
One of the most common mistakes when starting to work with data is
trying to solve everything at once. It is not about acquiring a lot of data
and “seeing what can be done with it”. It’s about thinking, what can you
measure and what decisions will you be able to make when concluding
the analysis? If you try to solve several situations at the same time, you
will lose focus and it will be very difficult for you to answer the business
Putting yourhomeinorder- Helpingfamilybusinessesreachnewheights:

4. From where do you Get Started?
So my message for family business leaders is that you don’t need to have
a massive amount of data to drive your business, it is also possible to do it
with smaller data sets. If you are not sure where you can get the data to
work with, first think about the internal data sources of your business that
you can use, like your CRM, your accounts system, your products stock
data etc….
Over time (and that time lag is getting always more shorter) family
businesses should realise (sometimes way too late) that because they just
did not analyse the data they always had in hand, they are stuck using
outdated business practices and hesitant to fully adopt the insights that
data analysis can provide.
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5. Being data driven is Culture dependant
Data-driven companies consistently execute on these three driving principles:
• They Think Differently. Data led business organisations recognise that becoming data-driven
requires a different mindset. Organisations must be prepared to think differently – based on a
critical way of thinking and a view to creative innovation.
• Fail fast, learn faster. Business leaders in data led organisations understand that individuals and
organisations learn through experience, which often entails trial and error. It has been said that
failure is a foundation of innovation. Companies that are prepared for faster iterative learning
— fail fast, learn faster — will gain insight and knowledge before their competitors.
• Focus on the long-term. Business leaders in data driven organisations appreciate that the data
journey is a transformation effort that unfolds over time. Becoming data-driven is a process.
Perfection is rarely achievable, but instead improvement can be seen and felt growing and
spreading over time.
To compete in the increasingly data-driven world of the twenty-first century, family business
leaders must learn and actively work to avoid the pitfalls of the past. Now more than ever, it is
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6. How should we sharethe data & its analysis?
As owners, you have the right to inform. You decide who can know what about your business. That
right, in turn, gives you control over the communication function in your family business, since
nothing of consequence can be shared without your permission. As you exercise this right, you have
to decide how to balance the often-competing goals of privacy and transparency. The communication
or otherwise of data and information needs to be done based on:-
Putting your home in order - Helping family businesses reach new heights:
• The importance of communication in building the trust capital your family business
will need to thrive
• The trade-off between privacy and transparency for the key audiences of your
family business—current and next-generation owners, spouses and employees.
• The steps required to create effective communication in your family business

7. Communicating to build the trust capital
Trusted relationships are one of the most valuable assets in a family business. Trust can
help you navigate the inevitable challenges that come with working together, and it can
help you form lasting partnerships. Strong relationships sustain your family business
across generations and help you compete with companies that may have more resources.
Communication is critical to building that trust. When communicating who is listening to
you will judge whether you are being:
• Competent: Do you bring relevant and effective knowledge, skills and abilities?
• Open: Are you being transparent and honest in sharing information, plans, and
decisions?
• Concerned: Are you demonstrating care about more than just yourself?
• Reliable: Can they inspire confidence by consistently delivering what others expect
of
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8. Thetrade-off between transparencyand privacy
For many family businesses, the instinct to hold information close is powerful. Owners
are, understandably, afraid that sharing information about the business can create
trouble—entitled children, meddling spouses, greedy employees or a loss of competitive
advantage. Why should anyone else be privy to the details of your family business?
I appreciate those concerns, but I encourage you also to ask yourself the question: What
are the consequences of not sharing information?
If communication is necessary to build trust, what are you giving up by holding your
cards too close to your vest?
It’s natural to struggle with the trade-offs between privacy and transparency in a
privately held family business. But some forms of information can be shared without
sacrificing privacy, by identifying the key stakeholder groups in your family business
and examine what information you should consider sharing with them and how and
why you should do so.
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9. Thetrade-off between transparencyand privacy
Current owners
In some families, owners have
different levels of involvement. Those
who work in the company or who are
involved in Board Room or Owner
Room decision-making will naturally
be party to more information. The
understandable instinct may be to be
guarded with those family owners
who are not as deeply involved in the
business . You should be careful about
the long-term consequences of leaving
certain familys out of the loop. Family
Businesses thrive when they are
backed by ALL owners with a
willingness to commit their capital
Putting your home in order - Helping family businesses reach new heights:
Next-generation owners
One of the biggest risks of family business owners is
that somehow their success will create a new
generation of entitled children. One of the ways that
family businesses use to mitigate this risks is to avoid
communication about the business with their children
but also to actively hide the information. They are
afraid that if they divulge financial information with
the next generation, the knowledge will foster the
children’s sense of entitlement. This concern, of course,
can be valid in some situations, but you can share
other valuable information besides financials with the
next generation.
You can gradually bring younger people into the loop
with information about your family values, the path &
sacrifices to success, the decision-making process and
the overall family business strategy. If you shield the
next generation from knowing anything about the
business, you are failing to prepare them to be future
owners and good stewards. You’re also missing an
opportunity to build their emotional connection to the
business (and each other), and you risk limiting how
much of their passion and talent they will invest.

10. Thetrade-off between transparencyand privacy
Spouses
Spouses, too, can provide talent and expertise
to the family business. Beyond offering their
own talent, in-laws play a critical role in raising
the next generation and greatly influence their
children’s interest in the family business. Many
family businesses struggle with how much
information to share with spouses who marry
into the family. Relationships may be strong, but
many family businesses still have the nagging
fear that sharing, say, financial information with
spouses creates vulnerability. The worry is that
when a spouse fully understands the value of
the family business, they could use that
information someday in a divorce/separation
proceeding. Don’t assume that just because you
exclude spouses from some communications
they won’t hear it. They will likely get second
hand information, which is hardly ever correct
and thus having them build wrong conclusion
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Employees
Some owners share information with
employees only on a need-to-know basis.
Often, family members occupy the key
financial roles or the owners have only
one trusted nonfamily executive or
adviser.
But if you are too guarded with what you
disclose, you risk losing your employees’
engagement with, and loyalty to your
business. When employees are lacking
insight into the overall health of the
business, they start filling in the void with
rumours, conjectures, and their own
anxieties. Many family businesses see the
benefits in the engagement and alignment
that come from openness with employees.

11. Having a Communication Plan
• With whom do you need to communicate? Present & next generation owners, Spouses, Employees
• What is the extent of that communication? Decide what you want to share with each audience, or at least with
those in the higher-priority tiers (See below)
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12. Having a Communication Plan
• What forms of communication do you need? In addition to agreeing on what to share with different
audiences, owners should consider the type of communication they want to have. In particular, is
this a one-way message to provide an update? Or is there an opportunity for a two-way dialogue
that gives people a voice even if they won’t get a vote? Owners’ lack of clarity on the form of their
communication can undermine good-faith efforts to inform others. As the family and business grow,
there is usually a need to have more formal ways of ensuring effective communication. That
infrastructure can take several different forms:
• Forums: Ideally, each of the Four Rooms (session 2) provides an appropriate forum for
discussing relevant issues.
• Policies: Having clear rules about what can and cannot be communicated is extremely helpful
in defining shared expectations. Those rules are typically decided in the Owner Room.
• Dedicated Communication Functions: As a family business grows beyond an informal, loose
governance style, the company often needs resources dedicated to managing the different
levels of communication.
• Platforms: Instead of relying on more traditional communication methods, family businesses
can use technology to share information. For example, some families use surveys to get input
on a major decision or to allow for anonymous feedback.
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