Any business can thrive over generations–here is how
If business owners and top management master the science of proper succession, any business can continue to expand, adapt and grow over many decades and even lifetimes.
But if they do not manage succession well, then everything else they do may be lost forever—all the hard work, the sweat, time and energy that they invest into the business to build it and make it successful could easily be lost in the next generation.
Why am I qualified to talk about this? Over 83 percent of the clients of my strategy and management consulting company are owners of family businesses from around the world, many of them in Asia, and many of them market leaders and owners of famous brands and family legacies. Our daily job is to make family businesses future-proof and empower them to thrive not only today and tomorrow but over generations.
In December, I wrote an article about family business succession but we received the request to expand on that because it is such an important topic for most family businesses.
When family members are not fit to lead
The owner of a Filipino family business contacted us recently with the request to help them with their succession planning. She described a situation that is typical for a lot of family businesses: the family members are not fit to lead. Through a lot of “force-fitting,” family members are pushed into roles they are not suited for. In her case, it even went beyond that. She said that most members of her family had no real expertise in the industry the business was operating.
In addition, they were also dealing with a recurring disease that is especially widespread in Asia: boardroom sugarcoating. Nobody was telling each other the truth. The result? Their family businesses were trudging along but falling far short of ever reaching their full potential.
You need to be brutally honest and face the factsIf you own a family business, the first mental model you need to apply when you try to establish a successful succession planning for your business is that a family business needs to be managed the same way as a “normal” business. Now, this may seem intuitive and straightforward on the surface, but in reality, not many family businesses are doing that.
Let’s face it: most owners have a hard time not passing on their business to their children. And because of that, they ignore the truth when they see that their children are not fit to lead.
If you are an owner in that situation, what should you do then? Well, it does not leave you with many choices, but you need to understand the root causes first.
Often, the children simply don’t have the motivation. Just because you are born into a family with a business does not make you a great businesswoman or businessman. And it doesn’t necessarily motivate you to take over the reins.
After having worked with countless family businesses around the world, my team and I have concluded that motivation is the hardest to fix. Skills you can learn, but if the motivation between older and younger generations is not aligned, you have very few choices.
Change is faster than ever before in history
This is a fact and has only been accelerated by the global pandemic and the resulting new economic order. What does that mean for you, your business, and your children?
Innovation becomes a key driver for the success of any business. To consistently produce innovation and breakthrough ideas at the highest level, the leadership of your business has to be highly motivated and “on the ball.” Otherwise, they will simply not be able to keep up with the pace of change that has accelerated so dramatically.
You do not know if it might be the best for your business to pivot in a few years and explore completely new areas. Anything can happen. The fittest businesses of today and tomorrow are the ones that can adapt quickly.
But how is your offspring going to do that if they are not motivated and just “trudging along”? What if they don’t have the drive and the grit to succeed against all odds and no matter what curveballs life, the global economy, natural disasters and unforeseen crises may throw at them?
The only constant is change
Just think back to 2019. Who could have predicted 2020: the first pandemic with millions of deaths since the Spanish flu in 1918 and a lot of countries with zero interest rates? On top of these, US crude finished in April 2020 at -$37 a barrel, below the zero mark few ever imagined could be broken. A negative oil price is like going to a Jollibee restaurant, and they pay you to take their Chickenjoy.
These will not be the last of unforeseen major global changes that are going to happen in the future. So what you need in the leadership of your company are people who are driven, smart and constantly willing to adapt.
The companies that adapt the fastest to major changes will be the winners in the new economic order.
The family has to stand as a unit
Another common challenge we see around the world and also in Asia is that the family should ideally stand as a unit to outsiders. This means: solving your quarrels and conflicts behind closed doors, but not out in the open. This can destroy a business. Why? People’s productivity declines immediately once these quarrels become public. And with “public” I mean that anyone outside of the family knows about them, including company executives.
One of our family business clients faced the challenge of intense quarrels between siblings that were fought out publicly. The results were disastrous. When leadership confided in us, they told us how these quarrels and the associated fears about the future of the company were easily one of the top three worries on everyone’s mind. It was sipping away people’s energy and productivity.
Keep the doors closed
Think about it this way: if you are a child and your parents are fighting all the time, how peaceful will your childhood be? How much will you enjoy playing rather than constantly checking the “pulse” of your parents’ conflicts? The same is true for any organization. Solve family struggles, quarrels and disputes internally but never externally.
Once we coached the siblings on how to align their motivation and establish a constructive way to deal with their disagreements, the overall productivity in the businesses soared.
3 next steps you can takeIf your children are not motivated to join the business: either hire external coaches or consultants to align your children’s motivation with yours. Or you can accept the fact that they do not share your excitement and put someone external in charge who is a great business leader to ensure that the business not only survives but thrives.
Solve family struggles, quarrels and disputes internally but never in front of top management or executives.
As a family, stand united. Your employees have to see the family as the backbone of the business, an impenetrable unit they can count on. Leadership from integrity breeds respect. INQ
As a family, stand united. Your employees have to see the family as the backbone of the business, an impenetrable unit they can count on. Leadership from integrity breeds respect
Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries:
www.TomOliverGroup.com or email [email protected]
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