Updated: Jun 13, 2022
Since ancient times, the family has been the basis of society in terms of values and growth. Also has been the cornerstone for the economy in most countries.
Family businesses are today the most important piece of the economy both locally and internationally. In the United States alone there are 5.5 million family-owned businesses, which contribute to 57% of GDP and employ 63% of the workforce. In other words, family businesses employ more than 98 million people in the United States.
According to studies from the Harvard Business School, 70% of family businesses that start fail or are sold without moving to the second generation. However, the challenge is to think beyond that second generation, establishing the foundations of a Family Government that frames the operational and the interrelationship between the business and the family, which will grow base on the financial capital generated by the family business.
What are good practices for family-owned businesses to transcend to future generations?
1. Strategically the family must understand its purpose
The purpose of a family is to enhance the pursuit of happiness of its individual members, and preserve values and wealth for the good of all. This wealth, as defined by James Hugues Jr. in his book "Family Wealth," is made up of human capital, intellectual capital and financial capital. The family wealth must be defined and transformed into a viable purpose and must be shared with the whole family.
2. Share family values
One of the characteristics of a family business is that in most cases the family name is closely related to the business. Business success or failure has a direct effect on the family's reputation.
Family values become the fundamental basis of everything created since the first generation. These values must be very well defined and shared among all members of the family nucleus, and must be incorporated into the Family Protocol.
3. The family must have some form of governance
Just as a company establishes its bylaws and its corporate operating regulations, the family must decide on a type of family governance in order to preserve the heritage and intellectual and financial capital in the long term.
4. The skills of family members must be identified and invest in their development.
The development of intellectual capital is vital for the continuity of the family business. In many cases that continuity must be found outside the family circle in order to take the organization to higher levels; however, the family must identify those young members, rising stars that will be part of future generations. Developing their leadership skills from an early age, allow them to be involved in the processes of the company and fall in love with the family business.
Leadership development programs for young people are an excellent tool to achieve this goal, allowing them to develop personal and professional goals oriented to the growth and continuity of the family business.
5. Develop the feeling of "family comes first"
Family means success, family is joy, family is growth. These feelings must be rooted in the core of the family having a wonderful impact on the family business
When I advise family businesses, I prefer to talk about continuity rather than succession. Continuity is related to the family businesses, the succession is linked to a person, who by her/his knowledge, values and experience can guide the business to the following levels.
At Ingenium Development, a Family Business Continuity Firm, we have the methodology, expertise, and tools necessary to help a family business to generate growth for generations. Contact us today at (305) 562-1928 or send an email to firstname.lastname@example.org