By Prof. Enrique Soriano
This is the final article in our three-part series about a third-generation family-owned business that our firm, W+B Family Advisory, assisted during a challenging period.
Cultivating a Sense of Legacy and Purpose
The older generation played a crucial role in instilling a sense of pride and purpose in the younger family members. By sharing stories of the business’s history and celebrating its achievements, they created a strong sense of legacy. Storytelling about the founder’s journey and the business’s milestones helped younger members appreciate the legacy they were part of. Engaging younger family members in significant projects made them feel valued and motivated. Regularly recognizing and celebrating the business’s successes fostered a sense of accomplishment and pride.
Effective family communication is crucial in this process. Open dialogues about the company’s history, values, and vision help to foster understanding and alignment among family members. When the older generation actively communicates the significance of their shared heritage, it lays the groundwork for a cohesive and committed family unit. This, in turn, helps the younger members feel a deeper connection to the business and a stronger sense of responsibility toward its future.
Effective Family Governance Ensures Lasting Legacy
Family businesses can learn valuable lessons from these practices. Effective family governance is not just about creating structures and policies; it requires a collective and deliberate effort to maintain open lines of communication, particularly when facing emotional challenges and the ever-present pressure to prioritize profit.
Strengthen Bonds and Build a Shared Vision: Using shared family history and values to create a cohesive strategy for the business.
Foster Unity: A united family can help create a cohesive strategy for the business.
Encourage Professional Experience: Family members gaining professional experience outside the family business prevents entitlement and brings fresh perspectives and skills into the company.
Implement Clear Governance Structures: Embracing and implementing clear governance structures, such as a family constitution and council, helps manage potential conflicts and ensures transparent decision-making.
Establish a Working Board with Independent Directors: Incorporating independent directors and board advisors provides objective, unemotional, and expert insights, enhancing the quality of decision-making and strategic planning.
Balancing family oversight with professional management ensures that the business benefits from diverse expertise and remains competitive. However, achieving this balance requires unwavering commitment to communication and governance principles. Regular family meetings, retreats, and transparent decision-making processes foster trust and unity. These gatherings provide platforms for discussing both business strategies and family matters, ensuring that everyone’s voice is heard and considered.
The pursuit of effective governance often faces emotional challenges, such as differing opinions or resistance to change. Families must address these challenges head-on through open, respectful, and continuous communication. This helps in navigating conflicts and ensuring that decisions are made in the best interest of the business and family. It’s essential to remember that governance is not a one-time effort but an ongoing process that evolves with the family and the business.
Moreover, balancing the drive to make money with the need for sound governance is critical. While financial success is important, it should not overshadow the importance of family harmony and long-term sustainability. Effective governance structures, such as a family constitution and an active family council, provide frameworks for making balanced decisions that consider both financial goals and family values.
By following these principles, family businesses can navigate the cousin consortium stage effectively. Establishing formal governance structures, leveraging professional management, maintaining strong family bonds, and incorporating independent board members are key strategies that contribute to the long-term sustainability and growth of the business. A commitment to governance, professional management, and family cohesion is essential for ensuring the continued prosperity of family enterprises.
Learnings
Family businesses can learn valuable lessons from these practices. Effective family governance strengthens bonds and builds a shared vision, creating a cohesive strategy for the business. Ultimately, the success of family governance lies in its ability to integrate family values with business objectives, fostering a legacy that prioritizes both financial success and familial harmony.
