ASSURING A HEALTHY FAMILY BUSINESS
Updated: Apr 28, 2021
Enduring family businesses require a healthy business. Many family businesses stay small, scaled to fit an economic niche and support a single family. Small family businesses can exhibit remarkable longevity, without ever growing.
Family businesses that grow are much more challenging to sustain, and yet a remarkable number of them also achieve longevity. However, strong financial performance does not always translate into longevity. Many healthy businesses are sold or destroyed as a result of family disputes, rather than business failings.
The most successful family businesses maintain a symbolic relationship between family and business, allowing them to leverage competitive advantages. When these advantages are sustained over long periods of time, family ownership can greatly contribute to business success.
Overly serving family needs, however can also compromise the welfare of the business. when incompetent family members are taken into management, or when family members receive excessive compensation or dividends from the business, almost inevitably both the business and the family suffer.
A strong, direct relationship between the owning family and its business is what defines a family business. Family owners usually dominate business management and governance. They typically provide the leadership and capital that sustain the company.
This direct connection between family members and the business influences many key decisions and also helps maintain alignment of the long-term vision and goals of the business and its ownership. This alignment of family vision and business goals can create a unity of purpose that should enable much greater business agility and a wider range of strategic options.
Maintaining this symbolic relationship over time is both challenging and vital. As the family and business grow, their interrelationship evolves. This requires attention to the long-term development of the family and the business, as well as their changing interrelationship.
At the core of every high-functioning family business is a healthy business, supported by family owners capable of sustaining and growing economic value. The goal is to balance and align family and business needs, so that what is best for the business is best for the family, and visa versa.
Family and business perspectives can clash or reinforce each other in four critical areas:
Fostering alignment of family and business perspectives in these areas is essential to optimize the health of the company and enable its long-term success.
See blogs articles which cover the four critical areas in more detail.
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