Family Businesses – The Need for A Strategic Mindset

Research constantly shows that Family Businesses are dominated by the so called “Operator’s Mindset”. This is a mindset formed by specialised knowledge passed down from generation to generation. Those with this mindset attend diligently to all aspects of operations, prizing traditions while constantly tinkering to make improvements as they look for growth opportunities primarily within the industries where their operating abilities shine. This mindset is deeply embedded in the cultures of most family companies and business families, a mindset build on the notion that if you want to be important and successful in the company and family, you have to be good at operations.

Over the years cultivating such a so called “Operator’s Mindset” has largely paid off because most industries and business models have, until recently, evolved slowly, making operational excellence central to success. Families and family companies have been able to adapt to most changes in their industries at a pace that avoids the ruffling of too many family feathers. So many family businesses worked well within this mindset by focusing on persistent operational improvement, develop loyal stakeholder relationships, building key talent in select individuals, carrying lower debt and building greater financial stability.

However when dramatic shifts do happen, as the one the whole world is presently facing, those family businesses that are not able to think beyond the “Operator’s Mindset” often fall behind, thinking they can wriggle themselves out of problems by hanging onto traditional products and practices. This is when such an “Operator’s Mindset” gets in the way of adapting to much needed change.

Family companies that have persisted over generations despite changing conditions strive for operational excellence, but not exclusively. They also are skilled at migrating to new value-creating activities and at leaving activities and practices that destroy value. They don’t become stuck in traditional businesses or outmoded practices. Some, after exhausting growth opportunities in their core business, diversified into different industries. Some experienced their industry maturing and consolidating around them and decided either to stay and acquire competitors or sell their outflanked business and redeploy assets.

In essence what distinguishes these long-term adapting family business is their strong “Strategic Mindset” among the family owners, their top boards and the family & non-family top managers. A Strategic Mindset recognises the importance of operational excellence, but insists on being in business activities that create value according to the key values of the owners. So those with a Strategic Mindset, do find the time to ask : Where are we creating value? Where should we invest our financial and human capital? How do we develop leaders and an organisation with the right culture?

So how should Family Businesses build a Strategic Mindset? Here are some insights about what the key family business owners need to do:-

  • Develop family and company missions that focus on creating value. Continue to recognise the importance of operational excellence in the company, but only in activities that grow the value of the company.
  • Design a structure of corporate governance (family council, board meetings, meetings with business advisors) to gain a high-level view of firm, as well as changes and challenges facing the business. This is to be considered the main support structure of the family business, which is so much needed to take swift decisions in turbulent times.
  • Develop an integrated strategic plan for the family and the business over time.
  • Develop family and non-family talent to support value creation. Make sure that the right investments are being made in developing such talent.
  • Move thoughtfully into new growth opportunities that have a good chance to grow the value of the company by learning to experiment. Strategic experiments for a company involve making measured investments in new activities and knowing when to increase your investment or pull out. Also identify what your company or family needs to be good at to excel in new value-creating activities.
  • Challenge businesses and other activities that destroy value but remain due to old attachments, a sense of tradition, or conflict avoidance.
  • Detach (more quickly than you are comfortable doing) from practices and people (even family members) that aren’t adding value. Loyalty is admirable, but loyalty to activities and people that don’t support your mission or values or that hinder any much needed change, is not admirable at all.

If there is a constant I face with family businesses, that is the particularly difficult time they all have with this last step. Leaders who possess an Operator’s Mindset are often slow to recognise or accept the fact that remaining attached to legacy operational methods or to specific people, is hurting their business. If there is anything that families in business have to be good at in these disruptive times, it’s letting go of what isn’t working.

At EMCS we specialise on how to deal with Fanily Businesses. We understand that Family businesses include a great deal of emotional attachment that needs to be dealt with and have the experience to bridge that reality with the need of having the family business managed on professional lines, with the right structures and the right people. Feel free to contact me to have a simple chat on the situation of your family business.and by the way there are €5,000 under the Business Transformation scheme that can be used to help you change to a Strategic Mindset!

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