John L Ward is the Co-Director of the Center for Family Enterprises at Kellogg Graduate School of Management (USA) and the Wild Group Professor of Family Business at IMD (Switzerland). He serves on the boards of four family companies in Europe and the USA.
The Enterprising Family addresses many of the most critical challenges to family continuity. Though it may take more than a generation of time to develop, it is a vision for all families to keep in mind as they develop their future plans and policies
Several inevitable critical issues ultimately threaten the unity and commitment of most families to the business they own. But many older families have found that a different way of defining themselves, and of defining their business, addresses those issues and even strengthens the family's unity and commitment to continuity.
The key idea, they have discovered, is to shift the family's focus from the business as the glue of the family to the family as the glue of the family. They forge a vision that finds new and more ways for the family to participate in the family's welfare and to be proud of the family's identity.
A description of the all too common path for business families follows. Then a different vision, the Enterprising Family, is presented.
The business of origin declines
Eventually, in almost all cases, the business that was built by the founder several generations ago, is no longer economically viable.
The strategic environment changes constantly and the original business becomes obsolete. Letting go of that business, so deep in the heritage of the family, becomes very difficult, before or after decline. The family's emotional identity to that business makes facing the sale or closing of the business extremely difficult. Even if the family members managing the business see the economic reality, those not involved in the business can see such a departure as heretical. The business origin drains precious resources. The efforts to resolve the situation can prompt significant family conflict.
Higher standards for business participation are needed
Over time, most business families make working for the company very selective. The rules for entry become more stringent. The reality that it is very difficult for family to work for the family business becomes more obvious. Consequently, with the family growing in size exponentially, the business growing more slowly, and the family encouraging fewer people to feel qualified, more and more of the family feel less and less attached. Pressures for liquidity, even sale, mount.
Some family rebel
Many in the family accept, even understand, that the business needs to be run like a business – especially as it grows in size and complexity. But some others will resent exclusion. The rules or processes will feel unfair or won't be designed perfectly. Those resentful will find justification and allies. Those serving and protecting the business will feel unappreciated, even angry. Factions develop.
The sense of purpose weakens
Many in the family begin to ask, "Why should we work so hard to keep it going? Why should we personally keep sacrificing economically? What's the purpose?" Building or preserving the business, per se, doesn't capture family members' hearts and souls. As the generations increase and family members become more distant from the founder, the sense of responsibility wanes. As family members spread further apart geographically and emotionally, a family's raison d'être becomes more important, but less obvious.
The business is blamed for it all
More and more of the family argue that the business is more a burden and disaffecting than a salvation for family unity and happiness. The business and maintaining it becomes the target of all those displeased. After all, they reason, the business – once the central, passionate common interest – has become an institution that threatens the welfare of the family and family members. The more those devoted to the business see this attitude, the more defensive they become. The lines are drawn: is it the family that matters or the business? This evolution of disinterest or even disdain for the business is common.
A new focus
But consider a different scenario. Imagine that, over time, the focus has evolved away from the business of origin. Other enterprises emerge and become a source of pride for the family. In fact, the founder's legacy is one of constant change, adaptation and creating new enterprises more than it is for the invention of the original products. Holding onto the business of origin is not the point; building a sustainable portfolio is. And how the family does business is more important than what business the family does.
Let us assume the portfolio of the family becomes very diverse. It includes several businesses. It also includes, perhaps, philanthropy, collective investing and serving family member needs (ie, a family office). More and more opportunities for family participation are created. The variety of opportunities – such as philanthropy – attracts family who were not interested so much in business, but were interested, talented and eager to contribute to the family in other ways.
Finally, envision that the business-owning family becomes as proud of its philanthropic contributions as it does of its business success. Further, the family becomes engaged and enraptured in the supportive services it provides all the family. Family member education, values acculturation and providing the highest quality of personal services for family members become a very significant part of the family's sense of purpose and pride.
The result? The extended family feel the purpose as being family centred rather than business centred. The meaning comes from how the family pursues its goals rather than what kind of business it is in. Lots of opportunities exist for a wide variety of family members to participate and lead. That is the orientation of the Enterprising Family.
The Enterprising Family sees family as the central purpose. It sees innovation, quality and significance – how it conducts its affairs – as the core values. The Enterprising Family creates opportunities for most, or all, of the interested family members to participate and contribute to the collective good. The Enterprising Family focuses the challenge as personal family leadership of the family's priorities. The Enterprising Family has the privilege of supporting all members of the family, especially those with special needs. Special care for the match of talents and corporate needs is appreciated.
'Enterprising' means the family is skilled and successful at building new ventures and institutions, and adapting to the changing family and external circumstances. The enterprising family solves one of the most complex of family business paradoxes: should the business's interests come first, or the family's?
The paradoxical resolution is that, because the family comes first, the business is able to run more like a business. That is because the family interests are addressed through the whole system, not exclusively through the operating business. In fact, 'running the business like a business' more clearly serves the family's real interests because of the need to fund and support the other family enterprises.
As mentioned, one important advantage of the concept is that there are so many roles for family members to fill. There are boards of each enterprise as well as management positions. In fact, the family of an Enterprising Family can make its primary involvement in the boards and lessen the inevitable difficulties of family members in operations.
While the Enterprising Family has involvement diversity, it also has values synergy. The values of each family institution can reinforce those of the others. The family's identification with and pride in how it works become stronger. Adaptation of each enterprise is even more possible as the values aren't tied to one enterprise, but are more abstract and family oriented.
The Enterprising Family addresses many of the most critical challenges to family continuity. Though it may take more than a generation of time to develop, it is a vision for all families to keep in mind as they develop their future plans and policies.