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Keith Brigham
A Family Business Carol
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Over the recent holiday, I was watching a film version of Charles Dickens' A Christmas Carol. In this popular tale, Ebenezer Scrooge is visited on Christmas Eve by the Ghosts of Christmases Past, Present, and Yet to Come. The Ghosts take Scrooge on a journey showing him what has been, what is, and what may be. Upon awaking the following day, Scrooge has completely transformed, reset his priorities and beliefs, and dramatically altered his behavior. This story demonstrates that our view of time and frames of reference can have a powerful influence on our decision making process and strategic choices.
There is a growing recognition that family firms are often different than non-family firms with respect to the role of time in their decision making.
With respect to the past, family firms are generally older than non-family firms and the tenures of family firm managers tend to be longer than their non-family counterparts. Family firms have more of a past and longer memory. In family firms, the presence of multiple generations (sometimes lingering like ghosts) can heighten the influence of past events on current decisions. (Read more from Keith Brigham and add comments.)
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Alexandra Sharpe
A Thought Experiment: Family Business and Upside Down Thinking
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As I was considering what to write for this blog, it occurred to me that the key themes important to family businesses are well documented and frequently explored: succession, leadership, governance, etc. The theory underpinning family business systems is now developed to such an extent that it is difficult to propose something completely new or fresh...But the blog format begs for something embryonic, an idea not yet fully formed. So instead, what came to mind was looking at family businesses from a different angle, in fact what came to mind was upside down thinking. What if we look at family businesses and their complex challenges and opportunities the other way round? Can we learn anything?
Rather than a typical family business lifecycle starting with the entrepreneurial founder, passing the enterprise on to his/ her children, a sibling group, and then these brothers and sisters passing the business onto their children, a group of cousins, imagine the process in reverse: a group of cousins passes a business to some siblings (their aunts and uncles); then the siblings pass on to their parents moving backwards through time ... Apart from being a little whimsical (maybe even nonsensical), might there be any insights that can be applied to the real world the right way up? Well, a few came to me...
1) Each generation lives within a certain paradigm and this can be hard to shift
Let's start our fantasy upside-down-family-business today in 2014 with a group of cousins...Technology plays an important part in their lives: their business systems and processes most likely rely on it, as do their relationships with each other; they keep in touch via skype, email and other applications. (Read more from Alexandra Sharpe and add comments.)
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The body of family business knowledge is growing rapidly in magnitude and sophistication. This is terrific -- and it is a tribute to the many outstanding family business researchers and authors. But sometimes it is good to "go back to basics" -- to remind ourselves (and to provide an introduction for those who are new to the field of family business) of some foundational concepts. In this month's Family Business Wiki Newsletter we are reminded: to pay attention to both the financial and the relationship sides of family business succession; to take a planful approach to developing the next generation and reinventing the business; to recognize and leverage the unique aspects of a family business; and to understand that each generation of a family business has their own needs and thus the family business has to be customized in each generation. The "tried and true" can be a good place to start -- and a good place to which one can periodically return. |
 | Jacqueline Thompson | |
The Two Sides of Succession Planning
 Succession is a make-or-break circumstance for a family business. A leadership transition can be fraught with emotion and complicated by difficult family relationships. In order to defy statistics and last beyond only one or two generations of family ownership, family businesses must be prepared for this important transition and invest in the structures, systems, and resources to maintain profitability and ensure longevity.
A successful family business leadership succession requires a 360-degree view. By considering the financial and relational aspects together, family businesses can more successfully navigate the tense emotions and difficult conflicts that often come with leadership transitions.
The Financial Side of Succession Planning
Valuation is key for any business sale or transition, as it establishes a clear basis for financial agreements. A proper business valuation will also correct any misperceptions and help to prevent squabbling over perceived value.
In addition, sound financial health is also imperative for an effective succession. Sloppy books, inaccurate numbers, or an entanglement of family and business expenses will make it difficult to retire the current leaders and successfully transition the new leaders.
When an exit is properly planned, family businesses have the important opportunity to maximize value. This will aid in the owner's retirement planning and will help to ensure continued success and longevity for the business.
While essential, these financial steps are not sufficient for a successful transition. Advisors could create the most legally sound and financially advantageous plan that completely flops due to uncommunicated expectations, a mismatch of corporate values, or unresolved conflict. (Read more from Jacqueline Thompson and add comments.)
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| Jeffrey Campbell | |
Three Ways a Family Business Can Endure
 There are a variety of things families can do to ensure their businesses thrive from generation to generation. Here are three factors to consider. Have a Plan It's important to develop a business transition plan and to do so early. An effective plan will help owners determine the future disposition of their business, both when to sell and to whom, and ensure the business will provide for the future financial needs of their families. It includes financial planning, estate planning, ownership transition planning, leadership and management training, strategic planning, and should consider all of the dynamics inherent in a family business. In addition, every generation should possess a wealth creation mentality; without this mentality, a family business will likely not endure. Develop the Next Generation Too many parents pass on the family business without passing on the knowledge and skills it took to create the business. There's so much focus and attention paid to the assets of the business that the human element-preparing successors for leadership-is often lacking. Having a strong business balance sheet is irrelevant if the next generation isn't equipped to run the business effectively. It's important to invest the necessary time to ensure subsequent generations are sophisticated enough to do the job. Continuously Reinvent the Business Conventional wisdom states that if you find that you've done the same thing the same way for five consecutive years, you're likely going to fall behind. It's important to allow your business to evolve with your customers' needs. That kind of agility is what separates successful businesses from less successful ones. (Read more from Jeffrey Campbell and add comments.) |
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