I recently attended a luncheon talk by the owner of a family firm, which now comprises a number of businesses, and has an annual turnover of more than Bt40 billion.

Clearly, this is a firm that has been successful in a financial sense, yet the founder talked about the success of his family rather than that of the firm.

 He made a number of suggestions about how to ensure that the family and the firm both succeed, and pointed out that these should be addressed early in the process.

 Questions related to family members working at the firm, distribution of the firm's earnings to both working and non-working family members, succession processes and decisions, governance, and compensation issues related to family members should be addressed before they become problems.

If the procedures are set in advance then all family members will be aware of what these are, and this makes conflict less likely.

He also suggested the use of a family business counsellor, because such individuals force family members to talk about issues that they might prefer to avoid. Yes, outsiders with this type of consulting experience can be extremely useful.

This firm has one very interesting concept that could be adopted by even small family businesses. Four times each year they have a family meeting, where issues related to the business are discussed.

This meeting is not a substitute for, or competition with the board of directors' meetings. It is intended to focus on the matters that relate to the intersection of the family and the business. He even invites grandchildren to attend, once they reach the age of 10. The family meeting was where they came up with a solution on how to handle family-member compensation.

They agreed that two outside, non-family member directors would form a compensation committee, and these would be the individuals who would recommend the level of family-member compensation to the board. The board of directors can either accept or reject their recommendation, but they cannot change it.

While this may not be a good solution for all firms, I think the approach used to come to grips with these difficult problems is useful for most.

Another issue that often causes problems for family firms is the degree to which family members are employed in the firm. This firm uses three simple rules.

First, the family member must be qualified for the position. Second, a new position will not be created just so a family member has employment in the firm. Finally, no person will ever be terminated to make a position available for a family member.

 As the speaker put it, family members have to meet the same levels of performance expected of non-family members. Since the rules are set in advance, it makes it much easier to handle the problem of family-member employment.

Obviously, family members not directly employed by the firm do enjoy some of the financial benefits, in the form of ownership dividends, and eventually inheritance.

Disagreements between family members who work for the firm and those who do not tend to be very common, and the approach used by this firm has been effective in avoiding such problems.

I really liked the speaker's final point. He said it did not make much sense to build a successful business at the cost of an unsuccessful family. I suspect a large number of family business owners have made this mistake.

In the end a successful family is the most important thing, and addressing family business issues early, before they become a dysfunctional issue, is one way to ensure that both family and family business goals are achieved.

Note: John E Butler is The Nation's columnist on managerial issues. His e-mail is jebutler@hawaii.edu.