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Family businesses face relentless change from two directions: external and internal. The external business environment places continuous pressure on innovation. At the same time, families must deal with dramatic changes such as births, deaths, and marriages, as well as differences in the values and aspirations of each generation. If families focus too much on immediate family matters, they risk not paying enough attention to the future of the business. It is important to pay close attention to both internal changes and external business developments. This is a tall order. Many families cannot be multidirectional.
Almost every business family faces some major internal changes, and each change brings new challenges. If families do not respond positively to these changes, they will be hampered by conflict and unable to turn their attention outward to take care of all that is needed to keep the business afloat. However, if we take a closer look at the changes that are occurring, At the inner One business family suggests that instead of viewing them as obstacles, you can view them as resources. Indeed, managers of emerging family businesses may find it difficult to reach agreement on the future direction. But they can also be a source of new energy, abilities and ideas, all of which can greatly strengthen the family business. In the new year, we suggest that entrepreneurs view internal changes within their companies and the challenges they bring as opportunities rather than threats, and leverage all their new and existing resources.
Challenge #1: Evolution from a single family to a “tribe” of related families overseeing multiple family businesses
Will the family maintain a common sense of purpose, or will it split into small factions going their separate ways?
What it means to be a family changes from generation to generation, and so does the nature of business. As the second generation evolves into a series of branch families with an increase in the number of households, the business family is no longer a single unified family, but can more properly be called a “tribe” of related families. . Nevertheless, these disparate family households are tied together by business ownership, trusts, and shared assets and must work together.
After launching a successful legacy business, the founding family can choose to harvest the wealth, sell the business, or build a portfolio of companies and investments. Whichever path they choose, they now have significant wealth and perhaps several businesses, each with their own needs to thrive and grow, and face different business environments. I am. As wealth diversifies and the number of families and owners increases, you may find it necessary and helpful to establish other organizations, such as a family office or family foundation. Families cannot continue with business as usual, but must establish governance processes that allow them to face change, continually evolve, move on to different businesses, and redefine themselves. To make informed decisions that everyone agrees on, families need to manage their portfolios with multiple leaders, each with their own perspectives and skills, rather than just her one leader. It then requires a structure that defines ownership, roles, work groups, responsibilities and accountability for multiple family members. The transition from a single family to a tribe means that families must change not only their leadership but also their culture.
Family businesses respond to these new realities by organizing in new ways. Successful families embrace transparency and collaboration with great involvement across generations, and tend to focus on finding meaningful roles for all family members involved.
Challenge #2: Longer lifespans and new family forms
Will families be able to continue to innovate by offering new roles to young leaders so they can pursue new ideas and opportunities? Or will the founding generation maintain tight control and resist change? And will it set us on a path to stagnation?
Two trends are having a major impact on family businesses. The first concerns life expectancy. With each passing generation, our average life expectancy has increased dramatically. At the same time, there is a growing interest in health and staying physically and mentally active. As a result of these trends, the idea of retirement is becoming less compelling. People who enjoy their jobs choose to stay at work. This means that family-run businesses have an older generation who wants to do essential work well into their 80s and even their 90s. As a result, the generation waiting in line is no longer her one generation, but two or three. If companies want to retain engaged families, they must find ways to embrace members of multiple generations and give them meaningful roles. At the same time, retained elders should consider moving from being operational leaders to mentors and resources.
In addition to the challenges posed by longer lifespans and improved health, there are challenges posed by changes in family structures. The “parent and child” model is no longer the norm. Divorce often means that aging parents and new spouses each want to feel connected to the family and play a role in the family business. Blended families and new family forms require family businesses to define comprehensive rules regarding ownership, participation, and involvement. There are many ways to belong to a family, and the old definition of “in the family or outside the family” no longer applies. Instead, nuance is required and different types of connections and memberships need to be defined. At the same time, policies and rules should be developed to manage conflicts and differences within the family to avoid family issues influencing business decisions.
Challenge #3: Educated and Inclusive Emerging Generation
can? Will families tap into and embrace the leadership energy of a new generation, or will these talented families drift away?
The older generation that founded the business succeeded in a completely different era. The resource that best enables family businesses to adapt and change is the contribution of younger generations who become new family members. Combined with their skills and contributions to our families, we can build a strong future. Therefore, successful families with great wealth are wise to invest in their children. This means giving them access to the best education, expanding their travels, meeting like-minded people and securing a front-row seat to the world. It is hoped that these life experiences will motivate the next generation to take a stronger, more active and influential role in the family business.
The involvement of these younger generations could change business in several ways. First, rather than focusing on a single successor, younger family members see themselves as part of a leadership group where everyone has a role within the company and is part of corporate governance, even if they are not employees. I am aware of this. Even if you have other jobs or projects, there are ways you can still contribute to the family business. Their diverse skills and experience enable family businesses to pursue several new avenues of innovation.
Additionally, men and women now see themselves as having equal roles, making young leadership teams larger and more inclusive. And when they think about the future of their lives, careers and families, they all want to know what family businesses have to offer and how best to approach it.
Given all these changes and possibilities, families cannot remain passive or ignorant, nor can they delegate responsibility to advisors. What they face is not only an opportunity, but also a responsibility to act in times of uncertainty. Each new generation must become more active, knowledgeable and professional by acquiring basic knowledge and skills and increasing the level of involvement in the family business. The new role of the “professional” family member is that of a manager rather than an employee or business operator. This means being aware, informed, and ready to engage in decision-making at key points. Families of all generations must organize, meet regularly, address differences, and make timely decisions about who they are and what they want to be as a company.
Challenge #4: Non-financial active family aspirations and social challenges
Will families invest in a meaningful future for the entire planet?
Tribes now share business, but what does that mean for them as families? Extended families that share economic resources have a deep understanding of who they are as a family and what their wealth means. We are starting to pay more and more attention to the purpose it serves. They often have two choices. You can either invest to strengthen your family, or you can invest some of your wealth in good causes where there is no “profit” to be found in money. To pursue this challenge, families must come together, organize, allocate resources, and commit to each other beyond being business partners. The result is new activities, roles, and opportunities that involve the family and give all members a reason to stay connected.
Emerging, privileged generations often look to the future and are concerned about the environment, communities, and social issues. They have a social agenda they want their families to enact, and they want to leverage family resources to bring about change. When families reveal their aspirations, they tend to discuss values and social impact, not just in philanthropy but also in investments and business roles. For families to remain strong organizations, we need to involve them, as well as our employees and communities, to create a better world for everyone. In this way, families invest in a positive common future that attracts young family members and connects their work to the wider community.
As we enter this new year, it is useful to know how the natural changes that occur in large families can add value to business families and encourage younger generations to come together and invest in a common future and future. is. all our share.
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