In its recently released global survey of family business owners, accounting and consulting firm PwC found that too few of them are establishing structures that can help them meet the challenges of the future. (For a report on the U.S. edition of the PwC study, see the "Openers" section of this issue.)
As the family company passes to the second generation and then to the third and beyond, the business environment will change—and so will the composition of the family. Your management team, with guidance from your board, must consider how new technologies might affect your industry, where in the world your competition will come from and what your future customers will demand.
In addition, your family leaders must anticipate what your family will look like a generation or two from now, what those family members' concerns will be, and how good governance can keep them united in support of the enterprise (even as the enterprise changes to meet the demands of a changing world).
This edition of Family Business presents the stories of two families who recognized the need for advance planning and, after considering what issues might arise in the future, were proactive in making changes to prevent problems that were foreseeable.
The Lyles family, whose holdings include construction, real estate and agricultural businesses in California, started to focus on strengthening family communication and connection about 10 years before the third generation would pass the baton to the fourth.
The Graeter family—the Cincinnati-based makers of Graeter's ice cream, which is sold in neighborhood stores and in more than 6,000 grocery stores nationwide—realized that they needed to confront questions about the ownership structure in order to ensure a harmonious partnership among the three fourth-generation members. Today, the fourth generation is thinking about how governance might evolve as they bring the fifth generation along. They already have formalized their business operations.
In PwC's analysis of its family business survey, the firm concluded that long-term success depends on family firms' ability to adapt. The most adaptable have leaders who take time from daily operations to envision the future, from both a business and a family standpoint.
Of course, unless you're clairvoyant, you won't be able to predict every circumstance your family business will confront. But some situations can be anticipated (to name a few: the family will grow larger with each generation, stock will be transferred from one generation to the next, some family members will move out of town, not everyone in the family will join the business). The more plans you make to address these challenges, the better equipped you will be to continue as an enterprising family.
"Good succession planning," the PwC survey authors wrote in their report, "involves a series of intentional, well-coordinated, strategic efforts, sustained over time."
Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact email@example.com.