ILLUSTRATION BY RUTH MACAPAGAL
Because over 83 percent of our clients at the Tom Oliver Group are family business conglomerates in the region and globally, we see every week how challenging it is for family businesses to create a lasting legacy that will thrive for generations.
Family legacy in business is a tapestry woven from shared values, traditions and stories passed through generations. It is more than wealth; it encompasses the family’s identity and purpose. These legacies are shaped by the founders and every family member who contributes to the business.
A timeless legacy is built on a forward-looking vision. Creating a vision that resonates with family values while adapting to market trends is essential. This includes setting long-term goals and milestones that align with the family’s ethos.
In my work, I see first-hand how most family business leaders are caught up in the day-to-day and rarely spend enough time to think ahead enough to paint a clear picture of what the business should be like when they are gone or when they are 70 and want to pass it on to their children.
But only if you start with the end in mind can you take the necessary steps today to ensure that you can create the best future for your business and the next generation.
Start with the end in mind: The ‘nothing is impossible’ mindset
I recall working with a family business patriarch from Geneva, Switzerland, who took several coaching sessions to clarify his vision of where he wanted his life and business to be 15 years from now. He inherited the company and never took the time to sit down and clarify his long-term vision, both personally and professionally. He did not have the tools.
Many family business owners find themselves in a similar situation. If you are such a business leader sitting at the helm of a family business empire, ask yourself: If nothing was impossible, what would my life look like 15 years from now? And what would my business look like? The clearer that vision is, and the better you can visualize it, the faster and more quickly you can map out the steps to attain it.
If you have challenges with that, contact a neutral third-party expert to support you with the knowhow and the tools. Be careful: It should not be someone within the family or the business, for they will usually be biased or mix their vision with yours.
Balance tradition with innovation
Balancing tradition with innovation is critical. Family businesses must continuously evolve without losing sight of the values that define them. Not just since artificial intelligence (AI) has taken the business world by storm has innovation been critical for the survival of a business. This is why we constantly remind our clients that they must have a system and culture that ensures “innovation” becomes a “constant” in the business. You need to get the best ideas from all employees across all ranks to produce breakthrough innovation and not miss trends. Making innovation a priority or not can easily make or break your business.
Take Eastman Kodak, for example. Once a giant in the photography industry, Kodak’s inability to adapt to the digital revolution serves as a lesson in the importance of innovation in preserving a family business legacy.
On the positive side, the Ford Motor Co. has upheld its commitment to innovation, as established by Henry Ford, by embracing electric vehicles and sustainability.
Establishing governance structures
Governance is the keystone in the arch of family business longevity. A clear governance structure ensures that the business remains true to its core values and objectives. Effective governance includes:
• Implementing checks and balances;
• Establishing transparent decision-making processes;
• Crafting succession plans that identify and prepare future leaders.
As a positive example, the Ferrero Group, known for Nutella and Ferrero Rocher, has successfully navigated transitions through well-planned successions and governance structures.
Gucci – a cautionary tale
On the flip side, the collapse of the Gucci family business serves as a classic negative example of the failure to establish a proper governance structure.
The Gucci brand was founded by Guccio Gucci in Florence, Italy, in 1921 and it rapidly grew into one of the world’s most prestigious luxury fashion houses. However, as the business was passed down to Guccio’s sons, internal conflicts and power struggles began to surface.
Without a clearly defined governance structure or succession plan, family members were often at odds with each other over the direction of the business. Disputes over control and leadership led to a toxic environment, with lawsuits and even a murder conviction marring the family’s reputation.
The lack of a governance structure made the business vulnerable to outside interests. In the 1980s, an outsider, Investcorp, was able to buy out family members and eventually gained complete control of the company by the 1990s.
Instilling values in future generations
The lifeblood of family business legacy is the culture, along with the values passed down through generations. This requires intentional effort in mentoring and educating the younger family members.
Strategies include:
• Embedding family values in business practices;
• Encouraging next-generation involvement in philanthropy;
• Providing opportunities for younger members to take on meaningful roles.
In our work, my team and I see daily how often business leaders at the top of the family business empire spend too little time instilling the correct values into the next generation. The results? A sense of entitlement, arrogance, complacency, weakness, lack of leadership qualities and lack of the necessary “street smarts” to run a successful business. To be clear, these things are usually not taught at business schools, and I have lectured at the best in the world.
Without a proper support system to compensate for their weaknesses, these people are later exploited by other family members or nonfamily members, people within the company or outsiders.
The wealthiest families in the world – values across generations
Through my work, I have gained access into the inner circles of some of the wealthiest families in the world, with a total combined net worth of over $153 billion as of the time of this writing.
There is a reason why these families have survived for generations and are still at the top. They instill values of “always stay hungry,” “never become complacent,” “always have a healthy sense of paranoia” and “always innovate” into all family members and therefore, make sure the business empire survives and grows.
This is why they continue to hire the best experts in the world so that we can tell them what they are missing, fix what is not working and cover the blind spots that they have. They still see their empire as a “startup,” even though they may have been there for generations already. That is the true genius of building multigenerational wealth. INQ
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 Tom.Oliver@inquirer.com.ph.