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Coalition governance

After much speculation and build up surrounding the 2010 general election, the UK has formed its first coalition government since the Second World War, write Peter Leach and Alexandra Sharpe.

Whilst many issues of policy are yet to be resolved between the ideologically opposed Conservatives and Liberal Democrats, one particular battle that looms is over business legislation and corporation tax. The outcome of this struggle will no doubt have wide repercussions for family firms based in the UK and those that operate here, but what else can family businesses learn from this unlikely coalition and vice versa?

Family businesses and the new UK coalition government certainly have one thing in common: paradox. While the coalition will have to reconcile the views of members with contrasting viewpoints, family businesses are constantly juggling differing scenarios such as parent versus manager and what is best for the business versus what is best for the family. There is only one way to deal with both of these cases: good governance and clear decision-making mechanisms.

If the coalition wants to work together effectively, they need to be clear: how decisions will be reached, how stalemates will be resolved and what exactly everyone's roles are. Likewise families working together as managers or owners need robust governance structures that allow a diverse group of family members to make decisions, without emotional baggage getting in the way.

This means being methodical, it means being strategic and it means setting out the rules of engagement before the family gets in the way of the business.

However, this is all easier said than done. Although being a family-owned business can be used to generate competitive advantage, family dynamics that perpetuate negative behaviour can get in the way. Similarly, while the new coalition members have the potential to work well together for the greater good of the country, there is also the possibility (and some might say probability) that individual party loyalties will get in the way.

Collaboration is no easy feat in any situation, especially when the people involved have different backgrounds, experiences and perspectives; but if approached correctly, it is often the most unlikely partnerships that are the most successful – an area of potential that family businesses are perfectly placed to exploit.

Research has shown that a diverse team performs better than a team comprised of similar people and it is often the case in a family business that the shareholders have a relatively high level of strategic involvement as owners in the business but have a variety of "day jobs" (ie, they don't all work in the business). Combined with trust and communication, this diversity encourages new and innovative approaches towards existing services, products, processes or even to new strategic avenues.

To harness this potential an inclusive structure is needed that gives the whole family a voice, that encourages the senior family members to listen to the next generation and vice versa. While this can demand significant effort to execute, from experience, it is those family businesses that develop an inclusive structure who survive and indeed thrive for the long term.

The UK has transitioned from a single party leadership to a shared leadership model. In much the same way that a family business transitions from the founder, to a sibling partnership or cousin consortium, a new power balance has emerged. Family businesses should take heed: two heads can be better than one, but the appropriate governance structures and protocols to support this must be developed, or else the potential inherent in multigenerational family ownership can be lost.

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