Over the last 10-15 years, we’ve seen a measurable shift in the complexity and speed of change in the world that we live in. Changes that used to happen across three generations are now happening within one. For family businesses, the accelerated pace of change places increased stress on an already complex family business system. The challenge that we face as advisors is how do we help our family business/family enterprise clients face these stressors and achieve common goals for the future.
I believe that for years, our focus as a field on succession planning has done a disservice to our clients. Succession planning both in context and content places the primary focus on the transition in the leadership of the business and uses that as the focal point for the discussions about the shifts in business leadership, family roles, and ownership transitions. What this approach fails to recognize is the emerging research that shows that success across multiple generations relies not just on the financial success of the business(s) or the financial success of the family, it relies on the quality and cohesion in the relationship between family members and the sense of pride and connection that they have to their businesses and other economic endeavors (Astrachan & Pieper, 2008).
For too long family business advisors have tried to manage the complexity of family business by protecting the business from the family. The conversations and structures are all built around the central idea of ensuring that the family does not screw up the business. This approach is fear-based thinking and often becomes a self-fulfilling prophecy. We see the family as a liability, and the structures that we put in place treat the family as such, and then the family starts behaving in this way.
Another way that I have seen advisors try to deal with the complexity of a family enterprise is by trying to boil the conversation down to: are you a business first family or a family first business? This question seeks to quiet anxieties about the real complexities of the family business system by implying a clear-cut, hard and fast rule: At the end of the day we will protect the business or at the end of the day we will protect the family The reality is that in complex families, we sometimes need to lean towards taking care of the business and sometimes we need to lean towards taking care of the family. Successful families will grow in their ability to know when they need to lean towards the business and when they need to lean towards taking care of the family.
So how can we as advisors help our clients deal with this growing complexity? How can we help them keep up with the pace of change? How do we help them leverage the competitive advantages of a family firm – the patient capital – the long-term thinking – the quick decision making and lack of bureaucracy. The answer is that business success and succession planning are not enough.
To achieve the goal of continuity for a family business across generations, and manage the tremendous complexity that they face, we need to shift from succession planning to having a family strategy for unity and cohesion. It is the unity and cohesion of the family that will sustain the business across the generations, not the success of the business. The business success is necessary, but not sufficient.
So, what do I mean by family strategy? A family strategy is an articulation of the vision of what a family wants to accomplish together across time, and the concrete goals, strategies, and objectives that will lead to the fulfillment of that vision. Up until now, our field has centered this conversation around the business, but our vision of success as a family should be much broader than that. That vision should recognize that we as a family are deploying more than just financial capital in the world. We are also deploying our human capital, our social capital, our spiritual capital. The focus of our field on the business(s) does not give us the context to allow us to engage in the conversation of what it is that will keep us unified as a family across time beyond the money, beyond the specific business that we are in today.
Shifting our focus to building a family strategy allows us to enter into this conversation. Our family strategy will allow us to share a common vision for the future of not just the business, but also a common vision for how we will nurture the unity and connection within our family across generations.
The outgrowth of this conversation is our family strategy. A successful family strategy should make it clear for family members “Why do we want to stay connected?” It should articulate a common sense of purpose and values. It should articulate goals and strategies for communication, governance and decision making, wealth management and business planning that will allow us to build a cohesive family group committed to achieving our vision.
I look forward to the day when we have embraced the realities of the complexity of the family business system and realized that if a family can define a vision of success that keeps it unified across time, then we can build the family strategy to achieve that vision.
About the contributor:
Andrew Keyt is an FFI Fellow and director of the Loyola University Center for Family Business. He is also the president of the US chapter of the Family Business Network. Andrew can be reached at email@example.com