Family businesses with inclusive corporate governance and communication plans designed with the family in mind stand a better chance of persevering across generations, writes Aik-Ping Ng
For multi-generational family businesses, periods of upheavals, such as the rapidly evolving Covid-19 pandemic globally, can raise concerns and uncertainties. To keep perspective and prepare for what’s to come, it is important at these times to take a step back to pause and recalibrate on purpose and objectives.
Family businesses deliver an exceptional amount of value to society and the economy. According to research firm Wealth-X, as much as USD15.4 trillion will be passed down from one generation through the next between now and 2030. Family businesses also contribute between 70-90 per cent of global GDP and create 50-80 per cent of jobs worldwide.
But it is also true that fewer than a third of family businesses survive from the first to the second generation; and an even smaller proportion are able to pass on their companies to the third generation.
The trend we are seeing is one where companies rise quickly, attaining impressive success, but for one reason or another do not survive a generational change in leadership. Fortune magazine reported that in the 1960s the average lifespan of a company in the S&P was roughly 60 years, whereas today it is closer to 20.
In light of this, there are important questions for family business owners to ask themselves:
- Is our existing business model fit to last for 25, 50, even 100 or more years?
- How can we improve customer satisfaction and loyalty while continuing to exceed client expectations?
- Are we always looking for new ways of doing things and nurturing an entrepreneurial culture in our firms?
Communicating for the future
For family business owners, involving stakeholders in discussions about the business and its future is paramount. It is important that expectations about roles and responsibilities are managed and an environment of trust is created.
Inter-personal dynamics between stakeholders of a family business are much more complicated given potentially conflicting agendas. To improve collaboration, developing a winning company culture that drives employee behaviour is key to unlocking value within family businesses.
Practical ways of achieving this include encouraging open dialogue based on common goals and shared purpose; as well as creating simple, precise and well-structured internal slogans and messages that reflect your business’s vision, mission and values.
Establishing and strengthening connections
To rise above choppy business environments and difficult market conditions, consider taking a break to bond as a team. Schedule office retreats (when the COVID-19 situation has improved) to relax and engage in activities that will bring team members closer together.
Getting to know your colleagues personally, and learning about how they prefer to communicate and interact, can go a long way to improving collaboration and creating trust. Using personality typing tools can also help to understand the diversity of behaviour within your business team.
Building trust catalysts across teams
Creating projects can bring together otherwise siloed functional teams to build mutual trust. More opportunities for collaboration amongst colleagues creates a culture where a sense of belonging is felt and trust is built across the company.
Improving communication processes and tools
As family businesses grow from one generation through the next, it becomes necessary to formalise communication channels. Reviewing the existing norms of communication in a family business is helpful for determining what has or has not worked in the past. Using the company’s intranet to send internal newsletters is a great way to ensure your teams receive the information they need to carry out their work and involve themselves in company activities.
Newsletters can also be used to celebrate successes, which helps build solidarity and a culture of belonging. Lastly, social media channels can be used to simultaneously build relationships with clients and work toward your business goals.
Leading by example
The leader of a family business has the opportunity to shape the culture of their company from the top down. One of the most important steps in doing so is sending out clear communications.
This can take the form of meeting regularly with employees about their needs at work; maintaining an open and welcoming attitude so employees feel comfortable voicing any thoughts or concerns; and being there to celebrate employees’ birthdays, anniversaries and important life events.
In family businesses, good communication is as important at the company level as it is at the family level. The challenge is discerning and working out a long term alignment between the two.
Businesses with inclusive corporate governance and communication plans designed with the family in mind stand a better chance of persevering across generations.
Aik-Ping Ng is co-head of family office advisory, Asia Pacific, and senior family governance advisor, HSBC Private Banking