Leadership is one of the key characteristics of family businesses which continues to prosper through generations. Although there are numerous leadership roles within the family and its business which needs to be filled, the family should not neglect how they are managed and how their governance structures interface with the governance structures of the business. Leadership together with management and governance provide a solid foundation for successful families.
A well lead, managed and governed business does not secure the success of the family. The family itself needs to be well lead, managed and governed. The ideal position for any family business is for the family’s governance structures and the business’ governance structures to complement each other. Senior leaders within the business compliment the leader within the family and vice versa. Families are encourage to identify the various roles and consider which family members are qualified (in aptitude, skill and qualification) to fulfil those positions.
John A. Davies[i] defines leading as “identify where the group needs to go (developing a compelling vision for the future), strategizing how to get there, and getting people to change in order to get there”. Davies further explains that family businesses tend to have more servant orientated leaders than non-family businesses would have. They lead by consensus rather than by being autocratic.
A strong “servant” leader is not necessarily entrepreneurial. In order to flourish across generations the family should ensure that they have a strong entrepreneurial ethos. Families able to adjust quickly to their changing business environment have more opportunities to grow and flourish. PWC’s Next Generation Survey of Family Business Leaders 2016 found that 58% of respondents said that their family business reinvests itself with each new generation. A strong leader who can lead the family in their entrepreneurial endeavours is a huge advantage. Developing entrepreneurial leadership abilities should be part of the culture of the family and children should be raised as entrepreneurs.
There is a balance between the business leaders and family leaders, in that the family can takes responsibility for the entrepreneurial development while business leaders focus on making the current business as successful as possible.
Davies sees managing as “getting a group to operate efficiently and effectively. Managing is done by planning and budgeting, organising, analysing problems, building and using management systems, prudently allocating resources, and providing performance feedback”.
The family must ensure that they are well managed. It is vitally important for the future existence of the family that they continuously move and behave like a group. Many of the aspects of the family requires management such as the assets of the family, their social interactions, their governance, their communication, their external relationships, their vision and their contribution to society. Good leadership needs the support of good management in order to maximise the effectiveness of the family.
A well-managed family will be an attribute to the business’ leaders. A family that interacts cohesively with the business allows the business leaders and managers to focus on their responsibility in the business rather than on managing the family and its demands.
The IFC[ii] defines corporate governance as: “Corporate governance refers to the structures and processes for the direction and control of companies. Corporate governance concerns the relationships among the management, board of directors, controlling shareholders, minority shareholders, and other stakeholders. Good corporate governance contributes to sustainable economic development by enhancing the performance of companies and increasing their access to outside capital.” The business’ governance must balance with the family’s governance. This implies that the manner in which the family makes decisions interacts smoothly and effectively with the manner in which the business makes its decisions. The success of governance is very much dependant on the leaders and managers within the family.
The manner in which the family decides to balance the leadership of the family with the leadership in the business will either add or detract from the generational success of the organisation. In order for families in business to flourish, strong leaders and managers are required in each generation. Strong leaders will encourage and facilitate the entrepreneurial ethos within the family and strong management will see the effective transitioning and repositioning of the family to stay a family of influence.
[i]Managing the Family Business: Leadership Roles. www.hbswk.hbs.edu; 27/4/2017
[ii]IFC Family Business Governance; p19; 2011
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