Is Your Family Business at a Tipping Point?
Most people are familiar with the concept of a tipping point, that magical moment when a threshold is reached that opens the floodgates. It can be a positive moment when enough pieces of a project come together that the rest of it seems to just fall into place. But it can also have a negative impact like when enough banks started defaulting, causing the U.S. housing market crash and subsequent recession in 2008.
Businesses face many tipping points in their journey; starting out small and reaching the point where they need to hire additional staff, expand to additional locations, take out additional loans, etc. Most business owners have plans in place and are expecting these moments where change needs to happen and a solution has to be implemented.
The same is true when your family business grows in size and complexity. What characteristic is that final tipping point that demands an improved form of communication, more structured access to specific documents, a more secure way to share information, or easier access for stakeholders when on the go? We recently explored this question, and while the exact tipping point may differ for each family’s needs, we’ve established some broad guidelines for you to consider.
Tipping Point Factors to Implementing a Digital Hub
How many family members and stakeholders are involved in your family business?
Simply put, families grow and multiply the more generations that become involved in the business. When starting with one or two founders, communication is simple – you walk next door, pick up the phone or maybe even have dinner with your co-owners at home each night. But then your children grow up and get involved. Cousins start getting added to the mix. Eventually you might have to work with that third cousin twice removed who you’ve never met in person.
To make matters more complex, most family businesses will bring in non-family stakeholders at some point. You find a need to hire family business advisors, bring in external board members and maybe even hire non-family key executives.
As your family business grows in numbers, having transparent communication that gets to everyone in a timely fashion can become more difficult. By the time you call each of your stakeholders personally with some important news, Bob has already heard from someone you spoke with earlier and he’s hurt you didn’t call him first. Family, right?
So if you can get the same message out to the exact people that need to hear it at the same time (instant notifications!), managing the communications with your ever-growing business becomes simpler. And a digital hub can help with that.
How spread out are your family members and stakeholders?
The geographical spread of your family members and stakeholders often goes hand in hand with the growing number – but not always. Some families spread out very quickly while others may take generations before they cross borders.
With today’s technology, distance is rarely a factor for getting work done. We’re all used to the Zoom meetings and Slack messages and Google drives that facilitate that work when we’re not in the same building. But sometimes that can get noisy too and people may not always know where to look – “I remember seeing that file, did Jim email that to me or was that in a Dropbox folder?”.
Bridging the geographical divide by having all family business governance documents, communications and event information in one location can ease the chaos of multiple applications. A digital hub can help with that.
How complex is your governance structure?
Do you have a Board of Directors? A Foundation? Maybe you’ve started a Family Office? Or have various committees planning family meetings, next gen education and investments. Or maybe you hold your family meetings with all owners present on Christmas morning while the grandkids open presents.
As you go from Christmas morning family meetings to having multiple legal entities involved in your family business operations and oversight, at some point a digital hub will become necessary. Trying to manually keep track of which individuals are involved with which board or committee is just asking for someone to be left off an email chain about an upcoming meeting. Wouldn’t it be simpler if you had a singular place to log into and all the groups of people you need to communicate with are already pre-defined so your message can get sent to the exact people needed and no one else? A digital hub can help with that, too.
What is the cadence of communication with stakeholders?
Do communications need to go out to all or a portion of your stakeholders frequently? Maybe to start it was just a quarterly board pack that needed to be sent out prior to a meeting to a set group of people. Simple enough, right? But as more committees form and more projects get started, that quarterly message quickly becomes weekly emails, monthly updates and RSVP management clogging up your inbox.
It’s important to also think about the varying levels of involvement from different stakeholders. Some may be on multiple committees and expect frequent interactions with the family business. Others may just want to have access to information but don’t want to be emailed every time a decision is made or a distant cousin has a baby.
If you’re trying to manage these flows and layers of involvement through email, it can become unwieldy and difficult to craft the correct cadence for each stakeholder. Moving everything to a space where very active and casual stakeholders alike can set their own notification frequency and easily access what they are interested or involved in when they need to can be a game changer for the satisfaction of your stakeholders. And a digital hub can help you here too.
With these considerations in mind, you may be asking, “How many of these do I need to meet before I need a digital hub?”. The answer is, unfortunately, it depends. Some families may want to take the leap early on when all these considerations are still just over the horizon of being a challenge with their current processes and family demographics. Other families may be slower to adopt new technology into their workflow and be comfortable managing these challenges for a while without a digital platform. But we do recommend you not wait too long, because the longer you hold on to systems and processes of communication that won’t meet your future needs, the more difficult it will be to get all your stakeholders on board and shift gears once you do establish a digital platform. We humans tend to resist change. So starting early has its benefits.
The question for you now is, Are you at a tipping point? Have you reached a threshold where the demographics and complexities of your business demand a digital hub to achieve the desired levels of transparency, trust, and clarity among your stakeholders?
Listen to the discussion to help you decide. We’ll be here when you’re ready.