Two things ensure a family business is successful and endures:
- Its ability to perform and be profitable; and
- Its ability to keep the family devoted to the business
I’ve been fortunate to work with some of the most prominent family offices in the world in recent years. And one thing that has always amazed me is the way some of them have managed to endure over many years and keep individual family members engaged.
Not so long ago I had breakfast on Hampstead High Street (London) with a family that has over 100 family members working within their business empire. “It’s gotten to the point,” said the family elder, “That we are advising young family members to go work elsewhere and first gain some experience before joining the family business.”
It’s quite something when a family business has lived past three generations. That’s because only a minority of family businesses even transition to second generation family owners. They say that by the time a founder’s grandchildren take the helm, the business is not far from its final days.
As a family business grows and future generations of family members join in, the challenge to maintain and grow the business becomes great. And it requires different skills, tact and strategy over time. A family must adapt and evolve.
Having worked closely with large family offices and family businesses – I’ve helped them make investments, raise capital, acquire companies or otherwise – and also spent time with them in more informal settings, I’ve come to identify some important factors that have helped them along the way. I would like to share with you what they are. Perhaps these traits will help those of you hoping to build long-lasting family businesses.
I’ll write about each of them over the course of several blog posts, starting with this one.
#1: Working in the family business is NOT a given
You don’t give away a senior post to Peter just because he’s your son. But that’s something which often happens with family businesses. You’ve got a boy or a girl who has never had any interest in the family business and has spent a decade or two unsuccessfully trying to make movies, write novels or create some form of art, suddenly join the company because he or she has always known they could do so if they wanted to. That is, they’ve always had a nice Plan B.
So one very fine day, Peter assumes a very senior position despite a) not having gained the requisite skills or expertise and b) not have genuine interest in the business.
Maybe Peter will fulfil his role well but more often than not he won’t perform at the level needed to grow the business. The result is that, in the long-term, the family business suffers.
Some of the larger families I’ve known encourage younger generation individuals to complete their university studies and gain several years of experience working with another company before applying for a role within the family business. Some of the very established ones even have set pre-requisites and expect graduate degrees and experience working for specific organisations such investment banks or a management consultancies for several years, where they must also show job progression and not merely cruise by.
What’s more, if a family member proves they are a fit for the family business then they’re not given special treatment. They’re paid market rate and the same as non-family members. So no special status, and they’re also subject to firing if they behave inappropriately or prove they’re unable to carry out their duties.
So to recap, family members are not given special status when it comes to joining the family business. They must earn the right to work there like anyone else.
Family before individual.