Family businesses share two things in common – they come from entrepreneurial roots and have a long-term orientation. However,
an increasingly volatile business environment is putting them to the test. Today’s family firms have to deal with multiple challenges in a rapidly changing business landscape.
Above all these challenges is the spectre of succession which always looms ahead any family business and having to deal with transitioning from one generation to the next.
As family businesses are increasingly challenged on their adaptability and how well they can align both their business and family strategies, family businesses have to be flexible, open-minded and be willing to embrace change to keep up. Can they dig deep and transform themselves to not only survive, but thrive in the long run?
This means that family businesses need to future-enable their businesses so that they can seize greater opportunities, extend the gap with their competitors and withstand external shocks, all while continuing to preserve their legacies. This could mean reconfiguring existing processes and removing roadblocks that are preventing their businesses from reaching their potential.
The changing landscape brings challenges but also offers an opportunity for family businesses to reassess and readjust their business strategies. In particular, digital transformation can help them do things better, smarter and faster.
Those family businesses that are willing to punch above their weight to remain relevant are more likely to pivot and keep moving forward whilst embracing transformational change.
For family businesses, the journey of transformation takes on another dimension because the personal nature of family relationships adds another layer of complexity. Conflicts can arise when family and business goals are not aligned.
It can be difficult for family businesses to transform themselves if they lack governance or people running it with little or no experience in governance. Professionalising the family business can create value as well as ensure the longevity of the business.
An important element in professionalising the family business involves tapping external talent to guide or lead the company. This can be in the form of non-family employees, external advisors or non-executive and non-family independent directors . While the family retains ownership of the company, outside talent with the right expertise can bring non-family objectivity to the company. These external professionals may be in a better position to initiate change or preside over strategic planning.
Besides all the above I believe there are also five important elements or ingredients that are needed to enable family businesses to transform and change to survive:-
- Families must take the job of ownership seriously, rather than viewing it as a birthright. Hence family members must “earn” the privilege to lead the family business or part of it. Owners — who traditionally believe they need 100% control of ownership and major decisions — must collaborate more and control less. Families need to become more flexible about ownership structures, their percentage of equity owned and possibly partnering with outside groups, all of which are critical for gaining access to knowledge, capital and new opportunities.
- Be able to address threats and pursue opportunities in a timely way will separate the winners from the losers. You can’t predict the future, but you can — and must — be able to anticipate and quickly respond to changing conditions. Family business owners need to gain altitude, join the dots, monitor signals of change and construct their view of the future. They cannot do this if they are always firefighting daily operational issues.
- Always endeavor to become more efficient. This is an ongoing process. In today’s world this is likely possible through the use of technology. So family business owners need to be digitilisation champions, not just for the use of technology per se, but in those instances where the use of digital solutions can help the business become more efficient.
- Plan the future. Keeping family members united, interested and contributing to the family business is especially challenging from one generation to the next, when there are increasingly diverse in terms of values and lifestyles.Family leaders need to embrace and harness the new diversity of the family, both to preserve family unity and tap into a rich pool of talent. Personal relationships, openness to new ideas, formal inclusion policies and offering a variety of roles for family members to contribute to the family enterprise can all help. All this cannot happen without proper succession planning. Families must engage their rising generations, who have different expectations and more options in their lives. Proactive and flexible approaches will be needed, including earlier invitations to “sit at the table” in important discussions about the future and development opportunities.
- Family Businesses need to step up both corporate and family governance. This means setting an effective and efficient board of directors, which sets strategy and general policies to family councils who are there for the family ownership to outline their vision, desires and possible input on strategy and expectations, besides preparing family members for the future.
The above article covers a number of topics and elements which will be covered in more detail during the the below event, which will be outlining the results of a survey held amongst 100+ family businesses.
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