Like their public counterparts, nearly all family business leaders are concerned about short-term revenue loss and cash flow these days. However, recent research shows they’re feeling confident about weathering the storm in the long term.
Family businesses, by definition, are survivors, according to Professor José Liberti of Northwestern University’s Kellogg School of Management. “If you start thinking about families that are four generations, three generations, they have learned through experience and faced hardships through time,” he says in an article on the university’s website.
It’s widely acknowledged that family businesses that have endured the hardships of multiple generations share the same traits that will sustain them through the current crisis and beyond. According to a joint study by The Harvard Business Review and the Family Business Network International, some of these traits include:
A shared value system
The joint HBR and FBNI report concludes that shared values not only provide a moral center for family businesses to withstand challenges; they also provide a means for the business to differentiate itself in the marketplace.
A shared vision for the future
With a common vision, the family business is better able to set goals and determine priorities. Shared visions support the family’s commitment because they are meaningful (which supports agreement on difficult decisions), engaging (which encourages talent development) and future-focused (which supports long-term planning).
Clarity about everyone’s role
Successful family businesses are ones in which everyone has clearly defined roles and responsibilities. These definitions are essential for avoiding conflict that often occurs within families. Clearly defined roles avert overlapping responsibilities and expectations.
Cohesion, interaction & communication
The joint HBR/ FBNI report defines this as “mutual understanding, respect and support, and a healthy exchange of ideas and discussion of key and delicate issues.” The study concludes that these behaviors determine the family’s resiliency and ability to respond to change.
An effective succession plan details the succession process and the standards used to determine when the successor is prepared to lead. Again, roles must be clearly defined for family members who will remain in the business. The plan must firmly establish that managerial aptitude is more critical than birthright, even if it means hiring a non-family member to lead the organization.
The good news and the bad news
The bad news is that FBNI’s study found that 40% of family businesses underperform in at least three of the areas noted above. The good news is that definitive action can help family businesses stay strong and sustainable.
Not sure what actions to take? An objective advisor can help take the emotion out of the discussion and get everyone on the same page. At Magone & Company, we know family businesses because we are one. Let us know how we can help keep yours strong for generations to come.