Henry Ford, Sam Walton, John D. Rockefeller, and your neighborhood florist all have something in common – leading their respective businesses to success and including family in the process of propagating their enterprises into the future. While this effort may seem to be a natural development of family-owned businesses, it does not happen without careful planning and thoughtful leadership. This is true for corporate titans and the small business owner.
Growing and transferring leadership and governance of family business interests and wealth can be a perilous journey and has proven so for many people. Complex family relationships and emotions can be impediments to sound business judgment and even paralyze the most talented businessperson. It doesn’t have to be this way.
A few general rules can be adopted that will improve the chances of success in leading a family-owned enterprise to sustained success across generations.
First, keep it business-like – it may be family but they likely constitute the “board of directors” in fact, or by association. As has been said many times, business is business, and this economic bromide holds everlasting weight. Family-owned or closely held enterprises need to be clear about expectations and discipline as it relates to “running the company”. Further, there will be family members officially involved, and others who are not involved at all. Are these roles and responsibilities clear to everyone? The answer to that question must be commonly understood.
- Over 90 percent of all businesses in the U.S. are closely held, and most of these are also family-owned businesses. (“Closely Held Corporations.” Inc., 2014)
Second, communicate early and often, and then communicate some more – virtually nothing can offset confusion and misunderstanding like sound, deliberate communication within any organization, but especially in family-owned businesses. Committing to communication will bolster team-building and mutual appreciation. Establish Family Councils that include both key family members who are involved and those not active in the business. Work to identify and celebrate the “secret family recipe” that makes the family tick and the business enterprise so special.
Third, embrace the importance of leadership in growing the business and in managing succession – establish and maintain leadership protocols and clear financial processes, e.g. a business plan, structure, and clear roles, like any successful entity or organization. The leadership dynamic in a family-owned business may be a traditional maternal or paternal hierarchy, or it may be something completely different. In any event, there is no substitute for sound leadership – mature, informed, patient, and considered decision-making and judgment. It can’t be assumed that the long-standing family framework will foster evident leadership. Current and future leaders must be identified and developed, and may not always be the heir apparent.
Finally, get expert support as needed – strengthen the business framework and gain objective advice that can reduce uncertainty and help grow, preserve, and manage family wealth – the business and beyond. The willingness to seek outside expertise can be the difference between a short-lived business venture and a multi-generational family enterprise.
This is true for corporate titans and the small business owner.
Horizon Performance Solutions, LLC