This article was written a decade ago. It presents several models and tools that link together as the work to be done as a business family succeeds across generations. They outline the complex tasks that make up the hybrid family/business entity. In the years since, I have been able to validate, extend and integrate them into a generative model, meaning continually wealth-creating, family enterprise.
Family enterprises are the dominant element of economic development in every country in the world. Family enterprises—that include families that own a legacy business, as well as those that have shared assets and investments that are organized into family offices–are different than other businesses and investment groups in two fundamental ways.
Key Differences of a Family Enterprise Structure
First, the owners have a personal relationship which means they have connections, obligations, and shared values and goals that go beyond just financial returns.
Second, they want to pass their wealth and success across generations, and therefore they have a long-term orientation.
These two factors make family enterprises special and allow them to do things that can make them stronger and more adaptable than non-family companies. While family enterprises can erupt in destructive conflict, their bonds and long-term commitment allow them to look ahead and collaborate on huge projects and goals.
After retiring from academia eight years ago, I began a journey across the globe to see the reality of how large, multi-generational, global family enterprises thrive across multiple generations, as both a thriving family and family enterprise. I wanted to see if what was advocated by mostly Western advisors was relevant and effective.
I traveled to more than 20 countries and interviewed successful families that had succeeded as both an extended family, and as one or more family enterprises, over more than three generations. I interviewed family leaders from two different generations, asking them what they did as a family and business to continually create financial and non-financial wealth. What I found validated and expanded what my colleagues and I had written. Their stories were shared in the book, Borrowed from Your Grandchildren: The Evolution of 100-Year Family Enterprises.
The Family Enterprise That Thrives
I asked family leaders what helped them not just survive but thrive over multiple generations. They looked back and shared their stories and reflections. Here are the key themes that emerged, that build upon and connect the elements of this article.
After they had succeeded as a business, in the second or third generation they made a commitment to use their wealth to create a great family, as an investment in the future. This led them to focus not only on the business, but on their relationships, goals, and activities as a growing extended family.
Shared Values
The key element of families linked to their success was their ability to build on their shared values. Their values evolved in each generation but began with a foundation of legacy values that were redefined and expanded by each new generation as a foundation for why they wanted to remain together.
Intended values weren’t enough. These families created a complex family and business organization to implement their mission, values, and goals. They organized structures, work groups, policies, time, and energy in defining both a business organization (boards and owners councils) and a family organization (family councils and assemblies) all connected by a family charter or constitution.
The organization of the family and the business as parallel structures that cooperate and inter-connect is what we call family business governance. It is more than just having agreements and policies, family governance is an active, high engagement, continually evolving shared activities that are undertaken to organize and develop the huge fortunes of a growing number of households that make up the extended business family.
Collaboration and Partnership
To accomplish their goals, the family had to evolve from a culture that was led by a single visionary, and paternalistic leader, to one with clear policies and practices based on collaboration and partnerships. Leadership and key roles were dispersed among multiple family members rather than centralized. The collaborative culture included cooperation across several key stakeholder groups.
I identified a generative alliance, where the elders (who held the legacy values and leadership), the rising generation (who had entrepreneurial and socially responsible values and practices), and non-family advisors and executives (who were tied to the legacy leaders but also listened to and helped develop the rising generation) were able to actively collaborate with their divergent perspectives. Advisors particularly were not tied to the policies of the elders but were able to connect and support new initiatives and directions. This alliance allowed the family to continually change and adapt, without becoming stuck in the ways they had always done things.
The families were continually evolving to continue to add value to their work together. Each generation recommitted to the whole, offering an exit to those who did not want to be part of the enterprise. They were continually remaking their business, and what they did as a family. This meant they dedicated time and energy to building relationships, and that the older and younger generations, despite their differences, were actively engaged with each other.
With a commitment to share and resolve their differences, the older and younger generations spent time together and were able to learn from each other. Since lifespans were longer, these families often found ways to engage three or more generations in varying roles rather than having strict boundaries around each generation.
Investing in the Future
The families invested in each new generation. Becoming stewards of the family enterprises demanded that the owners-to-be must understand their complex structure and be informed participants. They invested in development plans and education for members of their rising generations, not only to find business leaders but also to find meaningful roles as stewards for members of each generation. They developed regular, active educational programs that were part of family meetings, and supported personal development.
The families were aware that they were special and had been fortunate in their success. Others in their community—employees, customers, suppliers, advisors, friends–had helped them. They had a deep commitment to respect others, give to their communities and respond to concerns beyond their own business. They developed foundations, giving plans, and supported family members to contribute beyond the family and business. Their social mission formed a glue that connected young family members to their legacy and offered meaningful roles for new family members who wanted to make a difference. This was based on pillars of gratitude, humility, and stewardship.
Amazingly, the above principles and practices were found to be common among all these incredibly diverse families. Whether they continued to own their legacy business, whether they formed a family office for diversified shared assets, whether they participated in the management of their huge enterprises – these extended families were able to sustain their connection and commitment to each other personally, as a family that stood for something and was unified and aligned in a business, family, and social mission.
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