During a business school case session, a participant asked what seemed like a simple question:<\/p>\n
\n\u201cIs this a family business?\u201d<\/strong><\/h2>\n<\/blockquote>\n
The class began with standard definitions<\/strong>: family ownership, board control, multiple family members in management roles…Then someone made a remark that transformed the discussion:<\/p>\n
\n\u201cA family business is one where the family actively strives to make it a family business.\u201d<\/strong><\/h2>\n<\/blockquote>\n
This observation captures an essential nuance: simply inheriting shares doesn’t make you a family business<\/strong>. A family-owned firm is the result of a conscious choice <\/strong>and a continuously renewed commitment to remain one.<\/p>\n
Structure versus effort<\/span><\/strong><\/h2>\n
Family businesses can be understood from two complementary angles<\/strong>:<\/p>\n
1 – Structural definition:<\/strong> a family controls ownership and several family members exert significant influence over the firm\u2019s direction, whether as company leaders, board members or shareholders.<\/p>\n
2 – Intentional definition:<\/strong> family members dedicate significant time, energy and resources to functioning as a \u201cfamily in business.\u201d They engage in dialogue, establish governance structures, articulate shared values, invest in ongoing development and serve as stewards of the company\u2019s legacy.<\/p>\n
The first definition responds to \u201cwhat we are\u201d <\/strong>while the second relates to \u201chow we make it reality.\u201d<\/strong> A company can be entirely family-owned and still not function as a family business without collective efforts and a shared vision.<\/p>\n
This shared vision entails both the desire to own a business <\/strong>and the commitment to being a family<\/strong>. Yet how often do we neglect the family dimension?<\/strong><\/p>\n
The dual-engine model: family and business<\/span><\/strong><\/h2>\n
The family business is like a two-engine airplane:<\/p>\n
\n
- The family engine<\/strong>: healthy relationships built on trust and clear values, the capacity to tackle difficult conversations without damaging relationships, preparing next-generation leaders and nurturing a sense of belonging, love, service and generosity.<\/li>\n
- The business engine<\/strong>: strategy, a competitive business model, financial discipline, professionalization, attracting, retaining and developing talent (both family and non-family), and the agility to adapt to market changes.<\/li>\n<\/ul>\n
Without both engines running well, the plane can\u2019t stay airborne. By definition, a family business requires a dual commitment to function effectively: to be both a good family and a good business.<\/strong><\/p>\n
The critical role of governance<\/strong><\/span><\/h2>\n
The two engines of family business must be connected via a robust governance system. Governance isn\u2019t bureaucracy; it\u2019s a set of rules, forums and processes that enable family and business to work smoothly.<\/p>\n
\n
- The family structures<\/strong> itself through family meetings, a family council, an established protocol or constitution, employment and compensation policies, and entry and exit guidelines.<\/li>\n
- The business is rigorously governed<\/strong> through a board of directors or advisory board, independent directors, strategic planning and clear metrics.<\/li>\n
- Bridges must be built between them<\/strong>: people and governance structures that align the family’s vision with decisions made by the board and leadership team.<\/li>\n<\/ul>\n
When this system works well, a virtuous cycle emerges: a strong family strengthens the business; a thriving business develops better people<\/strong>.<\/p>\n
Three questions to ponder<\/span><\/strong><\/h2>\n
1 – Why do we call ourselves a family business?<\/strong> Simply because of our ownership structure or because of the deliberate effort we make as a family?<\/p>\n
2 – What are we doing to nurture the \u201cfamily engine\u201d?<\/strong> Do we create forums for dialogue, education, conflict resolution and building a shared culture? Are we actively instilling values of love, service and generosity?<\/p>\n
3 – Would an external analyst evaluating just the business\u2014without knowing it was family-owned\u2014consider it a strong company?<\/strong> If you can\u2019t answer with a resounding \u201cyes,\u201d the \u201cbusiness engine\u201d needs attention.<\/p>\n
A family business isn\u2019t defined by legal documents. It’s defined every day through our efforts to sustain the business<\/strong> and our commitment to loving, serving and being generous<\/strong> with one another as family.<\/p>\n
In the first article of this two-part series, we examined the defining characteristics of a family business. In the next installment, we\u2019ll explore how to cultivate a family culture rooted in love and service<\/strong>.<\/p>\n
Homepage image: Andreea Avramescu<\/a> on <\/em>Unsplash<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"
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