Five keys to success in a family-owned business.

Lachlan Murdoch's recent resignation from Rupert Murdoch's New York-based News Corp. generated a lot of speculation: Why did the son who had been expected to someday lead the global media empire withdraw from his post as deputy chief operating officer of the company? Was there disagreement between Lachlan and his father over the future direction of the firm? Did they clash because the elder Murdoch wasn't willing to relinquish authority to his oldest son? With children from several marriages of the family patriarch to consider, the question of who will eventually succeed 74-year-old Rupert Murdoch remains unsettled.

The news of this split in the Murdoch family hit a nerve for many family business owners. Whether a company is a giant like News Corp. or a small enterprise, conflicts between family members can exact a serious toll on the business and reduce the odds that the company will survive in the long term. Following are some keys to success to help you overcome the difficulties of running or working in a family firm:

Plan for succession.

The challenge of transferring company leadership from one generation to another is one of the most daunting challenges faced by family businesses. In fact, historically only 30 percent of family businesses make a successful transition from the first generation to the next. Without taking the time to develop and agree to a solid succession plan well in advance, companies risk falling victim to squabbles among family members about who should be in charge or what direction the business should go once the founder is no longer at the helm.

As more baby boomers reach retirement age in the next five to 10 years, a growing number of firms will go through leadership transitions. This makes the need to start planning now even more pressing. Among the key issues facing family business owners is management stability. Understanding the skills and goals of various family members is crucial to determining who is qualified to lead the firm into the future. Developing formal policies about employment of family members will help prevent conflicts and improve the quality of leadership.

Once you have a succession plan, share it with family members and give them a chance to ask questions and voice concerns. And be sure to consider family dynamics as well as business issues when developing the plan; anticipating problems and discussing issues now will minimize the potential for conflict later.

Hold regular family meetings.

Regular family meetings are an excellent forum for discussing a wide range of issues and making sure that everyone is working toward common goals. Understanding everyone's long-range objectives is crucial to preventing conflicts from interfering with the success of the business. Differences can often be resolved with good communication. Or it may become evident that a family member needs to leave a leadership role or sell his or her interest in the company in order to avoid perpetual conflict that could damage the business.

Families also should determine whether those who are not directly involved in the business will be compensated and, if so, how. A clear path should be established for joining the family business. Many companies require the younger generation to finish their education and work somewhere else to gain experience before they assume a position in the family firm. Then they carefully evaluate what role will best fit the individual's talents and skills and provide training to make sure that family members are well qualified for whatever role they assume.

Family meetings can be a forum for clarifying each individual's role in the company and for discussing how much the firm should grow and at what pace. By establishing a structure for regular communication involving as many family members as possible, you dramatically reduce the risk of having conflicts that will undermine the company. Everyone needs to know what is going on in the company and what to expect in the future Secrets can be very damaging to a family business.

Build strong relationships with trusted advisors.

The relationships you develop with people outside the family are vital to the success of a family firm. These include key trusted advisors--your banker, CPA and attorney--as well as outside board members and other business people who can bring fresh perspective and objectivity, as well as expertise, to business decisions.

Your banker, for example, can review your company's business plan and suggest strategies to help you get where you want to go and provide valuable information when you are working through transition as well as financial issues. Bankers who work extensively with family-owned businesses can tell you how other firms have addressed and resolved problems similar to those you are facing. They can help you recapitalize the company to finance the buyout of a family member who doesn't want to remain in the business or come up with creative solutions to make it possible for you to make a smooth transition of ownership from one generation to another. Having a banker who understands the need to address family goals as well as business goals is a great asset.

You can also optimize your opportunities for success by working with a bank that offers sound advice on financing, investments, cash management and growth strategies. Your banker, working together with a strong wealth management team, also should customize trust and estate planning, investment management and employee benefit plans to meet your company's needs. And through Private Banking, your bank can help you manage your personal finances as you acquire wealth through your business.

Include non-family members on your management team.

Successful family businesses recruit non-family members to fill key management positions with the most qualified leaders. Resist pressure to place relatives in positions for which they are not qualified. It's difficult to make a change once a family member is hired; if he or she is not up to the challenge, families often end up working around that person rather than dealing with the problem. It's very hard to fire a family member.

When you do hire from outside the family, make sure these individuals are treated as well as family members and do not feel like "outsiders." Include them in the communication process, make sure they have a voice in business decisions and compensate them well, considering that they probably won't have an ownership interest in the firm. It's worth making a special effort to retain non-family members who make a valuable contribution to your business.

Carefully plan for growth.

Conflicts may arise between family members over how quickly the business should expand. Work to align short- and long-term goals so that everyone is in agreement, and develop a growth strategy that doesn't involve too much risk. Entering new markets, introducing new products, making changes in management, acquiring or merging with other firms--these are all steps that raise the level of risk for a lender or investor who might help finance the growth of your firm and might make it more difficult for you to get capital. With a solid business plan that demonstrates a well-planned strategy for growth, you will have a better chance of getting the financing you need to achieve your goals.

There are a number of special challenges involved in building and sustaining a successful family business. These keys to success can help you make the most of your company's--and your family's--strengths and increase the odds that your firm will survive and benefit family members in future generations.

Scott Connella, is Union Bank Market President for the Metro Los Angeles Region for the Commercial Banking Group. He can be reached at [phone]. Bita Ardalan is Union Bank Market President for West Los Angeles; South Bay; the San Fernando, Santa Clarita and Antelope valleys; and Ventura and Santa Barbara counties for the Commercial Banking Group. She can contacted at [phone].