Against the odds, how to build a long-lasting business family
Fostering leadership can mitigate the forces that tear enterprising families apart
The adage “failing to plan is planning to fail” may be applicable to enterprising families. Transforming from a single business founder to a multigenerational enterprising family organization means shifting from an “I” to a “we” leadership mindset.
To keep a system of many kin in harmony for many family generations as opposed to just worrying about one’s self can be quite complex. This article aims to seed ideas about the building blocks enabling the pursuit of enterprising family organizational longevity with purpose and empathy.
Enterprising families are actually one of the oldest, the most observed and the most enduring organizational forms on our planet.
Scholarly research reveals that some long-lived enterprising families are skillful in creating winning conditions to succeed beyond three generations:
- They remain socially cohesive, demonstrating unity through care of family and individuality.
- They establish and retain their social position through family brand/reputation management.
- They successfully prepare and complete multiple leadership transitions of family leaders with strategic thinking and stewardship attributes.
- They continuously entwine their family, their business and social endeavours.
They nurture these first four conditions for more than three generations, or one generational wave (defined as three living family generations at any point in time), or about 100-plus years.
Conflicting behavioral expectations
The enterprising family idea is not so simple. As you can infer from the often negative media coverage of business families, the context is complicated. Embedded in these families are individuals entwined in multiple relationships with varying logics in communication and power differentials. Think of the parent-child, youngest-oldest sibling or the family board director-family CEO relationships. Each of these roles are carved from human relations with sometimes conflicting behavioral expectations. Birth order, gender, education and personality are some of the many factors which can explain or predict your social position and sense of belonging in the enterprising family.
Picture how confusion pervades some family conversations if it is not clear at the outset from which perspective the parties are interacting. Am I speaking to Dad as father, shareholder, board chairperson or CEO? Boundaries often overlap and signals can get crossed. Unclear roles and perspectives can ignite and sustain misunderstandings.
Eventually and quite frequently, these misunderstandings turn into conflicts that tear apart relationships and significantly impair the enterprising family’s wealth and wellness. These outcomes are tragic considering the origins of the family were supposedly born out of love. Therein lies the expression “from shirtsleeves to shirtsleeves in three generations.”
Focus on leadership talent
Sadly, few enterprising families successfully break this cycle. By why? Is there a better way? What can enterprising families do to mitigate the risks connected with unproductive family member relationships?
Family leadership learning and development substantively answers this question.
The founders of long-lived enterprising families and prospective leading family generations exhibit tremendous leadership skills. These leaders have strategic thinking and stewardship mindsets. They also have a masterful, holistic and long term view of all the enterprising family’s moving parts, its environment and stakeholders. They are adept at balancing the tensions between the enterprising family’s collective and individual interests.
Long-lived enterprising family leaders know that family capital growth is not limited to the compounding of financial capital over time. Rather, they appreciate the power of compounding human and social capital multi-generationally. Stewarding the stock and flows of diverse knowledge, skills and abilities of each individual enterprising family member is key to fueling harmony and growth. The enterprising family with its members facilitates opportunities and abilities to capture benefits or advantages by virtue of their membership in social networks or other social structures. They never underestimate the value of who knows who and what.
Easy enough. Just focus on developing your family leadership talent. Yet why are not more enterprising families favoring these best conditions? Because the challenge is the business of family, not the family business.
Four family leader archetypes
Leadership in James Bond families disassociates family and business. Leadership capabilities remain with and die with the founder. The Eternus family is reigned by an authoritarian who is the self-proclaimed business and family leader. Family and business are connected according to the leader’s rules, and family members who are not aligned with the ruler are excluded. These two leadership archetypes typify the command-and-control decision making model.
United families integrate family and business. This archetype approaches the definition of an enterprising family. The founder or family leader sees the value of developing human and social capital at the family level as a means to identify and select the best successor to run the business. However, talent development is focused on the succession of a single leadership role. Their odds of survival are better than the Eternus and James Bond families.
The Steward families are configured to be long-lived enterprising families. These families enable the winning conditions to sustainably compound human and social capital. The multi-generational family leaders understand that happy, caring and engaged family members, family cohesion, entwinement of family, business, philanthropy and community are goals only achieved through deliberate learning and practice. Family and corporate governance, although distinct, are seen as symbiotic. Decision making and perspective taking is encouraged and shared among family leaders. Empowerment and trust underpin their decision-making model.
People embody leadership and therefore conceive and enact strategy, any strategy. This also applies to enterprising family leadership and its family strategy. To effectively compound human and social capital requires a purposeful and empathic family leadership strategy that is led by a Chief Learning and Development Office (CLDO).
Leadership is a renewable resource
This is no different than looking to compound financial capital through the leadership of a Chief Investment Officer (CIO), all the while optimizing taxes and cash flows with the strategic guidance of your Chief Financial Officer (CFO).
The depth and breadth of leadership capabilities and capacity are at the root of organizational adaptiveness and continuity. Leadership is a renewable individual and organizational resource. Rooted in the leadership’s capacity to act are culture, vision, goal setting and monitoring, creating companies and family offices, setting up boards and family councils, and making capital allocation and succession decisions.
Focus on self and one will be bounded by one’s own limitations. Include others and you expand the frontiers of what is doable. Long-lived enterprising families sustain their family capital by encouraging family members to know thyself, know others and know thy context over generations. Building shared mental models that transform into productive behaviours takes time, foresight and planning.