Building a Sustainable Family Enterprise

Date: Nov 06 2018

Author: 
Family Office Exchange

Measuring success
Sometimes the greatest challenge for a family is to agree on how they will measure the “success” of the enterprise in each generation. The metrics of success should be tied to the current goals and priorities of the family, since they must be viewed in tandem. We can’t expect strong family leaders to emerge without investing financially in their development, and we can’t expect them to appreciate the value of the family enterprise if no one has been telling them stories that instill pride in the family’s history.
 
Working in collaboration with Dr. Dennis Jaffe, Family Office Exchange found that in order to succeed across generations, families demonstrate the following seven common qualities by the fourth and fifth generation:
 
  • A shared purpose and values
  • Family community across generations
  • Free choice to remain partners
  • Active development of human capital
  • Continual adaptation and resilience
  • A commitment to give back to the community
  • Professionally managed business assets and financial assets
     
The attitudes and behaviors of an enterprising family

In addition to those qualities, common attitudes and behaviors have emerged as a result of our advisory work with successful family enterprises over the past three decades. We have summarized some of the most common attitudes and behaviors of families who build strong and adaptable enterprises:

Attitudes of an Enterprising Family

  • Values the family’s history
  • Enjoys being part of a family “clan”
  • Recognizes the need to embrace diversity to accommodate varied goals among owners
  • Understands the strategic advantages to longterm thinking
  • Believes the collective goals of the family can produce better outcomes for every owner
  • Understands the value of diversifying away from concentrated assets

Behaviors of an Enterprising Family

  • Develops all forms of family capital and supports the individual’s view of capital
  • Develops future family leaders
  • Offers financial options and exits to all owners
  • Trusts the family governance system to represent the interests of all owners
  • Develops a lasting system for decision-making and conflict resolution
  • Fosters philanthropic contributions (both time and money)

 

Insights about success from FOX Members

Enterprise families spend lots of time discussing how they will measure value, as a thoughtful definition of success is not easy to pinpoint. But some of the most articulate fifth and sixth generation families have phrased their metrics for success in meaningful ways, and we offer some of them here for your reflection:

“Our benchmark of success is to pass along to each generation the same purchasing power we inherited from our ancestors.” 
“Our guidepost is to respect the guiding principles of the founders and to trust the governance process to produce better decision-making for the family. We are measured on these decisions.” 
“We see the past as prologue to the future, and we realize that some family values will be carried forward and that others are gladly left behind.” 
“We recognize every generation is a first generation in building its own view of the future together.” 
“We focus on generational harvesting in our family – not getting emotionally involved with any business we invest in. We have found that telling the stories about how we have failed and recovered has been the most valuable to our family for developing an entrepreneurial mindset.” 
“We measure the strength of our clan by the number of family members who are actively engaged in some aspect of our family’s enterprise.”

 

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This blog post is excerpted from the FOX members-only whitepaper, "Taking the Long-Term View of the Family Enterprise," which documents the characteristics of a family enterprise and provides a framework for you to consider as you manage the transition from a business-centric family to a family-centric enterprise.
 

 


Join your peers and FOX Founder and CEO Sara Hamilton this December 5-6 in Chicago at the FOX Family Enterprise Workshop. Attendees will learn about developing a framework for their own family enterprise plan, a process for outlining critical action steps, key questions every enterprise must consider, and will work through a newly updated 25-dimension Risk Roadmap for their family enterprise. 

Family Enterprise Thinking Workshop 2018