Mega-trends force family firms to adapt
The core dilemma of every family business is how to match family growth with the growth of the company. The typical family grows geometrically and business, unless exceptional, grow in line with GDP growth. This mismatch in growth rates has the potential to generate a lot of friction between the family and the business.
Family businesses will benefit by incorporating some of these approaches to meet this challenge:
• Faster growth: Family businesses seeking faster growth should actively consider product line extensions, acquisitions of new businesses, innovation and more investment in research development. All these growth strategies require more capital and greater focus on capital allocation.
• Human resources: More family means more complexity and the need for more process and consistency in the hiring, training and performance evaluation of everyone in the business. More intentional management of senior-generation members’ retirement and faster incorporation of the younger generations into decision-making roles are also necessary.
• Succession planning: Transitions in leadership and voting control of the business are always important but now must be more actively managed.
• Governance: It is essential for everyone in the family -- not just the direct equity owners -- to be on the same page in terms of shared values, objectives and long-term perspective. This is why today there is so much more emphasis on governance mechanisms such as mission statements, family constitutions and formal decision-making and communication forums, such as the family meeting, family assembly and family council.