07 July 2017
It is no secret that family businesses often struggle with governance, succession, and even survival. Although the media highlight numerous family-enterprise success stories, cases of harmony and longevity seem to be exceptions to the rule. However, with the right advice and a good company ethos, family businesses are in a position to grow and succeed in an ever-evolving market place.
Relationships are key to family business success. This includes relationships between family members and non-family employees. While family businesses may survive economic downturns and a competitive marketplace, conflict in interpersonal relationships can grind business to a halt and tear the family apart. Therefore, it is vital to have governance structures and a succession plan in place, find your future leaders, adapt a healthy work balance while maintaining and adapting the company ethos and values to the market place.
1: Find your future Leaders
Companies with sound governance and gravity should have no trouble attracting managers from within or outside the family. But how do they decide who is right for the highest-level positions in their firm? All talent, and especially family members, must be assessed on competencies, potential, and values.
The competencies most frequently required for success at the top of any sizable business include strategic orientation, market insight, results orientation, collaboration and influence, organisational development, and change leadership.
In family businesses, it is advisable to also look for people who understand the company’s ownership dynamics, accept that responsibility for multiple family generations comes with the job, and are able to manage sustainable growth.
2: Your parenting style should not become your leadership style
Owner-managers very often have few notable examples of leadership to follow; in fact, many of them probably started their business to get away from leadership styles they didn’t like. The challenge for family business comes when the main individual in charge decides to retire and no one has been trained to make executive decisions.
Children working in the business need to be allowed to make decisions and gradually take on the responsibilities of running the business. Families must be educated enough to perform the following tasks; handle conflict, whether for family or business reasons, accept positions of responsibility in the company, act as advocates for the business no matter their present responsibilities and see the family business as a living legacy, with an interconnected past and future.
Not only do children have to come to terms with taking things slowly, but parents also have to come to terms with the fact that they may not be the best person to teach their son or daughter how it's done.
3: Traditions, values and networks are conveyed at an early age
Experts say that it's never too early to introduce your children to the family business. In all businesses, leaders are role models for company values and traditions. However, family business provides the ultimate leadership challenge. The generation gap is very much alive in family businesses; the senior generation is mystified that their children don’t want to work 60-hour work weeks. They see the live-to-work mind-set as a lack of commitment to the business, and that’s not entirely fair nor is it knowing of their children’s and other younger employee’s desires for a different workplace experience.
From a young age children are watching the current leaders make decisions that reflect the values and culture of the business. This can be a major source of competitive advantage as values, traditions and even social and business networks are transferred from one generation to the next.
4: All employees should be equal
The best family businesses have some non-family employees. Few families can offer all the skills needed to run their business. Most reach out to the larger world to find employee skills not available within the family. The resulting blended work force makes the company stronger. However, it is important to treat all employees equally and not favour family members over non-family members.
Giving special treatment to family members, intentionally or unintentionally, can demotivate employees. It is important for family members to have an external board that allows them to step back and get some perspective.
5: Employing family – is it enough to share a family name?
While employing family members has many advantages including a built-in desire to see the business succeed, many family businesses fall into the trap of giving their family members key positions in their business without the proper training or experience.
Giving family members positions that they are not ready for can be detrimental to both the individual and the business. For this reason many family businesses require family members to have suitable qualifications or several years of professional experience outside the family business. Family members may also be required to apply for positions in the company along with non-family applicants.
6: Get an objective opinion
Growth and complexity of the business generally drive the shift to professionalising the business establishing a board of independent directors or hiring non-family executives. This shift to more formalised governance structures can be marked by a period of stress as the founder experiences the pain of letting go, having their leadership challenged and being evaluated and held accountable for decisions and performance at board level.
This can be a major leadership test for the family, but good governance structures make the business more attractive to external stakeholders, including banks and strategic partners, which will help the business grow in the long term.
Running a successful family business is an ongoing process that includes critical decisions as well as careful planning and preparation in order to successfully transition ownership, leadership and management of the business and the family's assets to successive generations. Create and implement your succession plan with your family while continuing to grow your business in the market place.
Kieran McCarthy, specialises in the family business sector having worked exclusively with multigenerational family businesses for over twenty years. Should you need advice on succession planning, governance or any family business matter, please call Kieran on 01 669 9999 or email me at Kieran.firstname.lastname@example.org