Family businesses are the most popular type worldwide, although few survive into the second or even third generation. Why don’t there seem to be more of them? Problems with succession planning, family strife, and a lack of entrepreneurial energy among the younger generation are the most typical factors. The big question is – what steps should a family-owned business take to secure its long-term success?
According to a study of century-old family businesses around the world, the value they provide isn’t only monetary; it also stems from how the family and business give back to the community with each passing generation. Because the controlling owners know and trust one another, they can plan for the future, make swift choices when they are aligned, and put their principles into practice in the company.
What distinguishes these families from others that consistently deliver healthy offspring? They have the following characteristics:
- They have a strong bond because they are committed to being guardians for future generations and to carrying on a tradition of shared values and vision.
- They communicated the family’s core values to the business and the larger community, resulting in an enduring family culture.
- Professionalism, transparency, teamwork, and a feeling of shared purpose and ideals are all essential.
- They adapt to changing conditions, exploit opportunities, and modify their business strategy as needed.
- As the family expands in size and income, its devotion to staying together grows more vital.
In a multigenerational family business, the first three generations face the same genetic and commercial development challenges. Most of the time, the first generation is led by an entrepreneur whose notion is a huge success. When the children of an entrepreneur see their parents’ success, they look up to them and anticipate nothing less than the same, if not greater, success for themselves.
People must master the skill of wealth management, learn to collaborate effectively and internalise the values of stewardship and accountability to reach such heights of affluence. They must also mentor the next generation, teaching them the company’s values and inspiring them to invest in the company as owners rather than managers or executives. Each generation must acquire the knowledge and passion required to carry on the tradition as stewards. They do this by not blindly following in their parent’s footsteps, but by innovating, reinventing, seizing new opportunities, and growing from disappointments.
To survive into the fourth generation and beyond, a family firm must actively develop a renewed sense of purpose and vision among its members while growing into a highly professional, often public, corporation. Many multigenerational families make the painful decision to sell their family business to establish a family office and investment firm. These families frequently initiate charity and educational programmes for a hundred or more family and community members.
With each passing generation, family and business dynamics change. Both the family and the business can prepare for potential challenges by implementing processes and procedures that are customised to the new conditions. Some tried-and-true family practices include:
Building Blocks of Common Ideals: A family business is, at its foundation, a firm with a clear objective and set of principles. If these ideas are to be passed down to future generations, heirs must reaffirm and enhance their commitment to them. If the organisation wants to attract new members, each following generation requires an updated set of values and a reinvigorated sense of purpose.
Long-lasting and regularly replenished: The family business is known for its adaptability and durability. Individuals and corporations are not immune to tragedy or misfortune. The family survives each crisis by finding ways to grow and learn from the experience. Founders are hesitant to delegate authority or discuss corporate strategy. However, once a family reaches Generations 2 or 3, individuals planning must brush up on the fundamentals of the business and financial arrangements. More family members will require access to and understanding of trust paperwork, company plans, and financials. Some family members will want explanations as to what they involve and how they fit into the larger picture. Family members freely share information about the business.
A shift in priorities: In its early phases, a business is frequently viewed as if it were a member of the family. As the organisation grows, it must maintain its competitive edge, which involves the instillation of professional discipline and the development of new skills. To remain competitive in today’s global market, each subsequent generation of a family corporation must finally abandon the assumption that the enterprise exists simply to provide for its members and open the door to outside expertise and creativity. It is time for the family to hold both family and non-family executives accountable. Furthermore, as time passes, the family head’s job shifts from owner/manager to overseer of non-family management. As a result, there may be generational conflict as the established order demands results and accountability from the younger, more powerful one.
Collaboration and engagement between generations: Siblings learn to argue and disagree before they know to work together. Some siblings will never understand this lesson. Furthermore, as a family firm enters its third generation, differences become more likely than similarities as cousins and married-in family members are introduced. If there are many more people to love and be loved by, family intimacy may decrease. However, in functional families, there is a common objective and a willingness to collaborate and respect one another. When tensions rise, certain family members or entire branches may leave the company. Those who remained were compelled to restore damaged trust, respect, and cooperative bonds to make difficult decisions.
Giving the Next Generation a Chance: The family innovates in ways that allow members to contribute to the family in new ways, whether as business and financial leaders, family-supported entrepreneurs, social innovators or philanthropists or as a community-serving family. Family members of the next generation may count on their elders’ affection and support no matter what decisions they make in life.
Charity: Some members of a family’s next generation may be concerned about the money they will inherit. They decide to invest some of the family fortunes toward tackling these concerns after learning about global wealth inequality and the numerous pressing demands. As a result, families who intend to continue breeding regard charity as a natural and healthy method to connect generations. Some family members have gotten interested in family philanthropy and foundations by giving opportunities for the next generation to participate in activities such as global missions and service initiatives as they grow older.
It’s difficult to picture a productive family not wanting to make a difference. Every family has a unique path forward that honours their traditions and legacy while also contributing to society as a whole. This commitment to assisting others generally begins inside the family’s business and the surrounding community, where members have a strong feeling of devotion to both long-term employees and regular customers.
It’s difficult not to be moved by the accomplishments of families after hearing their stories. The wealthy business family that has been around for a long time is not always a materialistic bunch that wastes money on useless indulgences, but it may be a force for good if its substantial resources are put to good use. The distinct nature of a family that shares not only resources but also a values-based connection with one another can be extremely beneficial as we face a frightening set of global issues in the coming years.
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