To Grow Your Business, Build the Family
I was talking to a friend last week after she had looked at our work on developing family charters. She has no interest in this area. However, after thinking it through for a while, she commented that “all families should do a family charter”. As well as being incredibly insightful, she’s absolutely right!
Whether a family owns a business or not, every family could benefit from sitting down and creating a family charter, by talking about:
- What does it mean to be part of your family?
- Who do you consider to be family?
- What are the family values and principles?
- What is the vision for your family?
All families would benefit hugely from this.
Of course, the above questions are at the very heart of a family charter, along with a large number of family decisions and expectations. The other core area is a detailed succession plan — here are some tips
And now here is the rub. For a family business to be successful in the long term, as much, if not more, focus needs to be on the ‘family’ aspect as on the ‘business’ aspect. Of course both are critical but, literally, you can’t have a family business without functioning family relationships. It’s like having the most beautiful home but, if it the foundations are not strong, it is not going to last in the long term. The ‘family’ is the ‘foundation of the business. If the family isn’t solid, the business will not last.
Every family business we or our colleagues have been involved with are, in fact, focused on the well-being and longevity of the family over time.
Initially they think they are focused on the business but, actually, their focus is the family. This includes: the huge and enormously wealthy families from the Middle East, the large and old families from Europe, and the younger fast-growing family businesses in the US, Australia and New Zealand. They know that to build their legacy, they must take care of their family. Their entire raison d’etre is the family. If I was Bill Clinton, I’d be saying “it’s the family stupid!”
It’s truly the worst kept secret of every successful family business: they keep the family at the heart of everything they do.
Obviously, they talk about what needs to be done to grow and protect the business. However, they know that if the family is not aligned, not able to make good decisions and settle their disputes, the business is just not going to make it in the long term.
We know that families who are actively and publicly acknowledged as family businesses get this. There are also a whole raft of ‘below the line’ families who run extraordinarily successful businesses and family offices who see it the same way. These are the ones who never come to conferences, may not even market themselves as family businesses. However, they know that for their business to be successful they must grow, support and align the family. If they don’t, they won’t be around for long.
Avoiding conflict within the family business
If the family does not work well together, several things are likely to happen. Because the family can’t or won’t make good decisions or can’t work together, the business is negatively affected. If it keeps going, the business is either going to go under, be sold (before too much value is lost) or broken up…. For an example of this, see this sobering story of how four brothers lost their $4b family business because they could not agree on crucial business decisions.
To be clear, for a long lasting family business, the family has to come first. The business is really a large and important tool that enables a family to come together to discuss how to protect and grow the family! And here we were thinking we were all about the business!
As an example, think about the amazing European family businesses some of whom are in their 12th or 13th generation. They might have 200-300 family members in their equivalent of the Family Forum who meet regularly every year. Even after the business has been going for 300-400 years, the focus is still on ‘how do we maintain the family relationships and cohesion?’ This is not easy to do and needs to be constantly worked on.
So why raise this? Why is this important?
It is important because I think we get things backwards both as family businesses and as folk who work with family businesses. For the business to survive and grow and keep providing benefit to the family, a huge focus has to be on the family and its wellbeing. If the business is to survive, it is critical to ensure the family can work together effectively long-term. The family need to be aligned and have agreements in place that enable them to make tough decisions and manage conflict so they can keep working together to grow their business. For a successful long-term business, the work starts with the family. Too often people put the emphasis on the business side of things, at the risk of neglecting the family legacy. The reality that successful family businesses understand, is that business success, when it comes to a family business, is as much about meetings in the boardroom as it is about family meals in the dining room.
So how do families do this? How do they set up their families so that they can build a solid, long-lasting legacy? Over the next several months, I’ll go into this in detail, but let me highlight some of the issues below.
We know that families are complex and messy. Some members of the family may be naturally brilliant business people, others may be artists, musicians, drug addicts, homeless, alcoholics, violent or want nothing to do with the family. Family members may stay married to one person for 60 years, others may have five different spouses. Some have children, some have none. Some may fight with their siblings while others may have close warm relationships. Some may want to renounce all material possessions and become a monk. Some may vote for the socialist party, while others may vote for right wing autocrats…
There is no predicting any of this and there is certainly very little chance of controlling it. And yet, to run a successful family business, families have to be able to manage these differences and hold onto the common ground and values that binds them.
One of the fundamental things to do is to provide a clear mix of sound and agreed family rules and core issues, like merit for those who want to work in the business. Allow family members to be family but also, if they want to, have nothing to do with the business. Understand each individual’s strengths and core competencies and allow them to use and grow those. For some, the family business is the correct place to do so, but other family members may want to do things in other places, in other ways. Figuring all of this out is not easy: it involves honest communication, building trust, transparency and constantly juggling fairness across the family.
In future blogs I want to talk through some of the ways that families, who happen to have businesses that they want to grow, can do so, while maintaining family harmony.
Please contact us if you’d like to talk further about this – it is an incredibly important topic and one that we believe has not had enough importance placed on it. Send me an email on firstname.lastname@example.org — I’m always happy to have a chat about this!