Among the core characteristics of family-owned businesses is the desire to leave a legacy for future generations. To achieve this objective, the owner family must share a long-term vision and the resolve to ensure the firm’s continuity.
In the firm’s initial stages, cultivating this commitment is relatively straightforward, since the founder is on the front lines to explain and embody the vital link among vision, strategy, decisions and their execution.
From the second generation onward, however, concerted efforts must be made to instill these values, says Alfonso Chiner, a lecturer in IESE’s Department of Strategic Management and member of the IESE Chair of Family-Owned Business.
“The fundamental characteristic of family-owned firms is the desire to leave a lasting legacy for future generations.”
In the second and subsequent generations, several family members may own equity in the firm and have different relationships with the business: some may have a solid grasp of its economic and business context because they operate in the same sector, while others work in completely different spheres. And in other cases, they have in-depth knowledge of the organization because they hold formal roles within it.
For family-controlled companies, the ability to forge a shared vision and decision-making framework is both a strength and an opportunity. On the contrary, the lack of common vision represents a significant weakness and threat to their long-term success.
Defining a shared vision
The path toward building a shared vision starts with analyzing, debating and thinking as a team. To this end, the following insights may serve as guideposts:
- Establish rules and codes of conduct to guide their interpersonal relationships in meetings and forums, with sufficiently rigorous governance bodies that facilitate the task at hand. While everyone enjoys family get-togethers and holiday meals, they don’t offer the best forum for strategic decision making.
- Use a common language regarding business parameters and economic concepts to ensure owners are able to participate in the decision-making process. To be successful, family businesses need fluid lines of communication and the capacity to work together as a team.
- Ensure the owners have an ample understanding of the firm’s business model and sector to align their expectations and positions as stakeholders. These considerations include the need to strike a balance between risk and profitability and following the tenets of financial prudence to ensure its stability and solvency.
- Make sure that owners appreciate the company’s history and decision-making criteria at different crossroads in time. The rationale behind past decisions often helps firms navigate current challenges.
- Reaffirm the reasons for staying together and the desire to leave a legacy. In a sense, every generation has to “re-establish” the company by recommitting to its purpose and objectives. There is no obligation to continue as a family business but those that choose this route should make sure their decisions are in alignment.
- The ability to share, spread and live out the firm’s values is paramount to promoting cohesion and commitment. A shared vision becomes an embedded business reality one decision at a time, which sometimes calls for humility, generosity and a spirit of service. Leaders of family-owned firms who fall short of the mark in this respect can be the kiss of death for the company’s longevity.