Does very family business need a code of conduct to manage conflict?
In the context of Australian family firms who are not embracing the creation of a Family Constitution, possibly due to the constraints of time, money or actual endeavour and whilst there can be clear benefits in bringing a family together to debate their purpose, vision and terms of engagement, the fact that there are few constitutions is not unusual.
The use of a 'Code of Conduct' may well be an alternative in order to clarify values, how to behave and how to communicate. A Code of Conduct can be a truly beneficial way to bring the family together.
It is a living document and does need to be reviewed and updated regularly as the challenges of family ownership develop through the generations - first generation challenges are often different to those facing third, fourth and older generation firms, and it needs to reflect the changing nature of the family, ownership and rules of engagement too.
It could be argued that the essence of the Code of Conduct is not fundamentally different to the premise underlying a Family Constitution but if it works as an alternative and gets families engaging in discussions about things that really do need to be addressed, then surely they have to be a good thing?
In theory, the ideal approach is to set up a constitution. However, that’s easier said than done. The problem with constitutions is they’re time-consuming and everyone has to be consulted. They are not enforceable in law but they can get very legalistic. This might explain why a KPMG – Family Business Australia survey has found that four out of five family businesses have no constitution. It has ever been thus – these findings are consistent with similar surveys in 2005, 2006 and 2007. For most family businesses, it’s too much work and runs the risk of bogging everyone down in process, bureaucracy and legalisms. A code of conduct, on the other hand, requires less work. It’s designed to put substance, formality and backbone, some would call it discipline, into the dealings of both the family and the business.