family - Blog - Global Risk Community2024-03-29T08:02:46Zhttps://globalriskcommunity.com/profiles/blogs/feed/tag/familyProfessionalizing the Family Business: Getting Readyhttps://globalriskcommunity.com/profiles/blogs/professionalizing-the-family-business-getting-ready2019-12-22T06:00:00.000Z2019-12-22T06:00:00.000ZJoseph Robinsonhttps://globalriskcommunity.com/members/JosephRobinson808<div><p>Every firm will eventually reach the point when it has to professionalize the way it operates. This is done by instituting more rigorous <a href="http://flevy.com/blog/wp-content/uploads/2019/04/pic-1-Professionalizing-the-FAmily-Business-300x217.jpg" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2019/04/pic-1-Professionalizing-the-FAmily-Business-300x217.jpg?profile=RESIZE_710x" width="300" class="align-right" alt="pic-1-Professionalizing-the-FAmily-Business-300x217.jpg?profile=RESIZE_710x" /></a>processes, establishing clear governance, and recruiting skills from outside. Family Business is no different.</p><p>In the Family Business Survey, 43% of the companies believe that the need to professionalize the business is a key priority over the next 5 years. But the family firm has another dimension which other companies have to tackle: the family itself.</p><p>The issues in <a href="https://flevy.com/business-toolkit/family-business">Family Business</a> are much harder to address. They are more personal, more complex, and the risks if it goes wrong are potentially terminal. Many times, family firms fail for family reasons. It is no surprise then that the progress of Family Business when it comes to professionalization is slower.</p><h3>Contextualizing Professionalization: What is a Professional Company?</h3><p><a href="https://flevy.com/browse/flevypro/family-business-professionalization-3728">Professionalization</a> is more than a mere change in family management. A company is regarded as a professional when it has a high internal standard of performance and ethics which the company strives to achieve. A company is said to be professional when it has a culture that emphasizes on performance, consistency in rewards, adherence to the <a href="https://hbr.org/2002/07/make-your-values-mean-something">core values</a> of the company, strives for fairness, and treats people like adults.</p><p>A Family Business can be a professional when family owners are good stewards and a high level of performance is encouraged. This can be achieved when the Family Business adheres to the <a href="https://flevy.com/browse/flevypro/family-business-professionalization-3728">6 Pillars of Professionalization</a> which can lead Family Businesses to be professionally managed.</p><h3>The 6 Pillars of Professionalization</h3><p><a href="https://flevy.com/browse/flevypro/family-business-professionalization-3728" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2019/04/slide-1-_-Professionalization-of-family-business.png?profile=RESIZE_710x" width="750" class="align-full" alt="slide-1-_-Professionalization-of-family-business.png?profile=RESIZE_710x" /></a></p><ol><li><strong>Attract</strong><br /> The first pillar is Attract, develop, and retain great family and non-family talent. The best position is for a family that produces a business leader with enough skills, good values, and has the ability to keep shareholders, employees, key customers, suppliers, and other loyal family leaders. A family must be realistic about its talents and passions to make rational decisions as to who will manage and lead the business.</li></ol><ol start="2"><li><strong>Ensure</strong><br /> The second pillar is Ensure that the organization can always make a timely big decision. The best position would be when the business makes timely decisions about capital expenditures, organization changes, hiring of key managers or its strategy to succeed. Taking timely big decisions is essential in business more so when the business environment is very volatile.</li></ol><ol start="3"><li><strong>Strengthen</strong><br /> The third pillar is Strengthen family discipline and commitment towards the business. There should be enough family discipline to act responsibly towards the business and adequate dialogue about important family business concerns. Family commitment to the business is of strategic importance.</li></ol><ol start="4"><li><strong>Respect</strong><br /> The fourth pillar is Respect the management hierarchy and empower employees to make decisions. Family members must respect the hierarchy of the business and must involve non-family managers in decisions. The congestion of decision making at the top of the organization generates passivity, slows progress, and stifles creativity.</li></ol><ol start="5"><li><strong>Create</strong><br /> The fifth pillar is Create systems to ensure consistently high performance and fairness. There is professionalism when family management is systematic within its <a href="https://flevy.com/business-toolkit/performance-management-perf">Performance Management</a> practices. We need to understand that systems are the fundamental driver of professionalism.</li></ol><ol start="6"><li><strong>Guard</strong><br /> The sixth pillar is Guard your core values like a hawk. Employees must embody the core values of the business and the basic ethical standards of honesty, respect and fairness. The ethical dimension of professionalization is as important as the performance dimension.</li></ol><p>The process <a href="https://flevy.com/browse/flevypro/family-business-professionalization-3728">Family Business Professionalization</a> is one with a lot of challenges. Each pillar has its own challenges, as well as strategies to take to effectively put these pillars in place. Understanding these challenges and strategies provides companies the best direction to undertake the 5 Pillars of Professionalism.</p><p>Interested in gaining more understanding of the <a href="https://flevy.com/browse/flevypro/family-business-professionalization-3728">6 Pillars of Family Business Professionalization</a>? You can learn more and download <a href="https://flevy.com/browse/flevypro/family-business-professionalization-3728">an editable PowerPoint about <strong>6 Pillars of Professionalization</strong> here</a> on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</p><p><strong>Are you a management consultant?</strong></p><p>You can download this and hundreds of other <a href="http://flevy.com/pro/library/frameworks">consulting frameworks</a> and <a href="http://flevy.com/pro/library/consulting">consulting training guides</a> from the <a href="http://flevy.com/pro/library">FlevyPro library</a>.</p></div>Keeping Family Committed: The Family Business 5 Dimensions of Activityhttps://globalriskcommunity.com/profiles/blogs/keeping-family-committed-the-family-business-5-dimensions-of2019-12-22T06:00:00.000Z2019-12-22T06:00:00.000ZJoseph Robinsonhttps://globalriskcommunity.com/members/JosephRobinson808<div><p>Family businesses are an overlooked form of ownership. Yet, they are all around us. One-third of companies in the S&P 500 index <a href="http://flevy.com/blog/wp-content/uploads/2019/04/pic-1-Family-Business-5-Dimensions-300x199.jpg" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2019/04/pic-1-Family-Business-5-Dimensions-300x199.jpg?profile=RESIZE_710x" width="346" class="align-right" alt="pic-1-Family-Business-5-Dimensions-300x199.jpg?profile=RESIZE_710x" /></a>and 40% of the 250 largest companies in France and Germany are defined as a family business. A <a href="https://flevy.com/business-toolkit/family-business">family business</a> means that a family owns a significant share and can influence important decisions.</p><p>As family businesses expand their entrepreneurial beginnings, unique performance and governance challenges are encountered. The generations that follow the founder may insist on running the company even if they are not suited for the job. And as the number of family shareholders increases exponentially generation by generation, the commitment to carry on as owners cannot be taken for granted. Less than 30% of family businesses survive into the 3rd generation of family ownership.</p><p>Almost all companies start out as family businesses but only those that master the challenges intrinsic to this form of ownership endure and prosper over the generations. To be successful as both the company and the family grow, a family business must achieve strong business performance. This is achieved by putting in place the <a href="https://flevy.com/browse/flevypro/family-business-5-dimensions-of-activity-3755">5 Dimensions of Activity</a> together and in synchrony.</p><h3>The 5 Dimensions of Activity</h3><p><a href="https://flevy.com/browse/flevypro/family-business-5-dimensions-of-activity-3755" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2019/04/slide-1-Family-Business-5-Dimensions-1024x768.png?profile=RESIZE_710x" width="750" class="align-full" alt="slide-1-Family-Business-5-Dimensions-1024x768.png?profile=RESIZE_710x" /></a></p><ol><li><strong>Family</strong><br /> The Family is at the very core of the family business and its sustainability. There should be harmonious relations within the family and an understanding of how it should involve with the business.</li><li><strong>Ownership</strong><br /> Ownership is maintaining family control while providing fresh capital for business. There should be an ownership structure that provides sufficient capital for growth while allowing the family to control the key part of the business.</li><li><strong>Governance</strong><br /> Clear rules and guidelines in Governance serve as an anchor to enabling family businesses to get on with business strategies. There should be strong governance of the company and a dynamic business portfolio.</li><li><strong>Wealth Management</strong><br /> Beyond the core holding, families need strong capabilities for <a href="https://www.investopedia.com/terms/w/wealthmanagement.asp">managing wealth</a>. There should be professional management of the family’s wealth.</li><li><strong>Foundations</strong><br /> Charity is an important element in keeping families committed to the business. <a href="https://www.charitywatch.org/top-rated-charities">Charitable foundations</a> promote family values across generations.</li></ol><h3>Learning the Ropes in Sustaining Family Business</h3><p>Keeping family members committed requires putting in place the 5 Dimensions of Activity. Each dimension carries within itself a sustaining mechanism and an approach on how to manage each dimension. The sustaining mechanisms and approach to management are 2 critical elements in which each dimension is anchored on. Application of each dimension without the 2 elements is like a sail without an anchor. It remains unstable and without direction.</p><p>Let us take a purview of the First Dimension: The Family.</p><p>The Family is the very core of the family business and its sustainability. There must be a harmonious relationship and a good understanding of how it should involve itself in business.</p><p>A sustaining mechanism that should be put in place is the establishment of oral and written agreements that address issues and permeating the ethos of ownership. This creates a strong sense of purpose that contributes to the sustainability of the family business.</p><p>Supporting the Family is best approached using the meritocratic <a href="https://flevy.com/business-toolkit/leadership">leadership</a> where leadership is by able and talented persons. There should be an owners’ board that represents the family and approves the appointment and an advisory council that provides strategic guidance to the board.</p><p>Companies should have a good understanding of the sustaining mechanisms and the approaches to management that is most suitable for each dimension. Making this an integral part of the family business ensures the continuous commitment of each and every member to the goal and purpose of the family business.</p><p>Interested in gaining more understanding of all <a href="https://flevy.com/browse/flevypro/family-business-5-dimensions-of-activity-3755">5 Dimensions of Family Business Activity</a>? You can learn more and download an <a href="https://flevy.com/browse/flevypro/family-business-5-dimensions-of-activity-3755">editable PowerPoint about <strong>Family Business: 5 Dimensions of Activity</strong> here</a> on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</p><p><strong>Are you a management consultant?</strong></p><p>You can download this and hundreds of other <a href="http://flevy.com/pro/library/frameworks">consulting frameworks</a> and <a href="http://flevy.com/pro/library/consulting">consulting training guides</a> from the <a href="http://flevy.com/pro/library">FlevyPro library</a>.</p></div>Following The 10 Steps to Effective Succession Planninghttps://globalriskcommunity.com/profiles/blogs/following-the-10-steps-to-effective-succession-planning2019-12-08T06:30:00.000Z2019-12-08T06:30:00.000ZJoseph Robinsonhttps://globalriskcommunity.com/members/JosephRobinson808<div><p><a href="https://flevy.com/browse/flevypro/family-business-effective-succession-planning-3709">Effective Succession Planning</a> in Family Business has been redefined in the 21<sup>st</sup> century.<a href="http://flevy.com/blog/wp-content/uploads/2019/04/pic-1-10-Steps-to-Succession-Planning-300x263.jpg" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2019/04/pic-1-10-Steps-to-Succession-Planning-300x263.jpg?profile=RESIZE_710x" width="300" class="align-right" alt="pic-1-10-Steps-to-Succession-Planning-300x263.jpg?profile=RESIZE_710x" /></a></p><p>The <a href="https://flevy.com/business-toolkit/family-business">Family Business</a> sector continues to be vibrant, successful, and ambitious. This, despite tough economic conditions and accelerating pace of change. Family firms are vital to all economies. It offers stability, a commitment for the long term, and a responsibility to their communities and employees.</p><p>However, despite the extraordinary longevity of individual family firms, the average life span across the sector is three generations. Only very few get past four generations. Not surviving the transition to the next generation may be a sign of a Family Business not achieving their long-term ambitions.</p><h3><span style="font-size:12pt;"><strong>What is Succession Planning</strong></span></h3><p><a href="https://flevy.com/business-toolkit/succession-planning">Succession Planning</a> is the process of establishing goals and then mapping a path towards onward. It includes traversing the landscape and avoiding the various challenges that succession presents. Companies encounter certain considerations. They are faced with issues relating to retention of the intended successor, the possibility of jealousy by other employees, and how employees respond to the succession plan.</p><p>When addressing these concerns, it becomes essential that Family Business must create a disciplined succession process. When succession planning is undertaken, it improves chances for business continuity. As a famous saying goes, “Failing to plan means planning to fail.”</p><h3><span style="font-size:12pt;"><strong>The 10 Steps to Effective Succession Planning</strong></span></h3><p>A well-managed succession process is a rallying point for family firms to reinvent itself and find new energy for growth.</p><p><a href="https://flevy.com/browse/flevypro/family-business-effective-succession-planning-3709" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2019/04/slide-1-10-Steps-to-Effective-Succession-Planning-1024x768.png?profile=RESIZE_710x" width="750" class="align-full" alt="slide-1-10-Steps-to-Effective-Succession-Planning-1024x768.png?profile=RESIZE_710x" /></a></p><p><a href="https://flevy.com/browse/flevypro/family-business-effective-succession-planning-3709">Effective Succession into Leadership</a> focuses on building up internal capabilities and strengths.</p><ol><li><strong>Get experience outside the family firm</strong>. This brings a broad range of experience to the task of leadership that can be beneficial to the family firm.</li><li><strong>Develop a strategic plan for the medium term.</strong> In developing a strategic plan for the medium, it is essential that this is consulted with all the shareholders.</li><li><strong>Broaden the decision-making process. </strong> Broadening the decision-making process includes making decisions collectively.</li><li><strong>Strengthen the role of the Board.</strong> This step enables the Board to have a key role in overseeing the succession process.</li><li><strong>Clarify what the retiring generation will do.</strong> Undertaking the fifth step ensures prevention or proper management of any misunderstanding that may arise.</li></ol><p><a href="https://flevy.com/browse/flevypro/family-business-effective-succession-planning-3709">Effective Succession into Ownership</a> focuses on early preparation and full collaboration to achieve effective ownership transition.</p><ol><li><strong>Start early.</strong> Family firms are encouraged to start the process as early as possible.</li><li><strong>Communicate, communicate, communicate.</strong> The second step to effective succession into ownership makes sure that everyone with a stake in the future has a say when it comes to the succession process and the transition of ownership.</li><li><strong>Do your homework.</strong> Succession planning may involve approaches that can cause difficulties depending on circumstances and jurisdiction. It is essential that family businesses do their homework.</li><li><strong>Invest in education.</strong> Investing in education is an essential part of succession. People running the business must have the right expertise.</li><li><strong>Diversify your wealth.</strong> The fifth step to effective succession into ownership focuses on building assets outside the family firm.</li></ol><p>Members of Family Businesses must understand that an effective succession into ownership is not an end but must be viewed as the beginning. Hence, every step that is required in succession planning must be done with clear direction and purpose. For, in the final analysis, succession planning creates lasting legacies for the business. But this can only happen when it is done right.</p><p>Interested in gaining more understanding of the <a href="https://flevy.com/browse/flevypro/family-business-effective-succession-planning-3709">effective Succession Planning</a> in Family Businesses? You can learn more and download an <a href="https://flevy.com/browse/flevypro/family-business-effective-succession-planning-3709">editable PowerPoint about <strong>Family Business: Effective Succession Planning</strong> here</a> on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</p><p><strong>Are you a management consultant?</strong></p><p>You can download this and hundreds of other <a href="http://flevy.com/pro/library/frameworks">consulting frameworks</a> and <a href="http://flevy.com/pro/library/consulting">consulting training guides</a> from the <a href="http://flevy.com/pro/library">FlevyPro library</a>.</p></div>