Abram Nicholas Pritzker, businessman and member of the wealthy Pritzker family of Chicago.(Photo by ... [+]
TV shows like Succession and Dynasty offer a glimpse into the power dynamics experienced in many multigenerational business families across the world as they feud over control of the family business and family wealth.
No matter which community, continent, business, or family size, the powerplay is usually similar.
In business families, the founding generation has their own idea for the future of the business, which may not align with that of the next generation. This causes the founding generation to struggle to relinquish control for various reasons, which may include a lack of trust that the next generation is equipped with the ‘grit’ and ‘tenacity’ required to steer the business into the future. On the other hand, the next generation may not trust that the founding generation possesses the innovation, flexibility and speed required to compete in today’s business world.
According to a KPMG Family Business Report the goal is not necessarily to keep the family business the same as it was when it was founded, but to keep the founders entrepreneurial spirit and dream alive, by developing new capabilities and taking the best of what each generation has contributed to the business, and to inspire each succeeding generation to build on and reshape it in a way that contemporizes the business, while retaining the founders inspiration and vision.
What steps can be taken by business families to navigate this period of transition to the next phase of leadership and smoothen the process of appointing a suitable successor?
The first step to forging a harmonious decision is to identify and agree on a shared purpose. This means to determine why the family wants to be in this line of business together, if at all, and what are the goals, objectives, and outcomes they hope to achieve for the family and for the business.
There is no fixed playbook to guide through this arduous task, given that families differ in structure. Some families in business consist of nuclear families, blended families or multiple generations, and the goals, desires and ambitions of each individual differs and is influenced by a multitude of external factors.
Coming together to identify and determine the family’s shared purpose will strengthen their alignment. Families need to look beyond financial elements and identify what non -financial ambitions tie the family together in business. It could be a desire to build a reputation as the no 1 employer of labor in their community or to build an empire focused on a particular industry, as Bernard Arnault has successfully achieved in the luxury goods market with LVMH. Some elements will be prioritized differently and there is no harm in this. The purpose of the exercise is to find common ground on the essentials that will keep the family in business together.
Once this has been determined, the family will need to collectively agree on the rules and policies on how this goal will be achieved. These rules and policies must be transparent, accepted and understood by everyone and then the family can begin to identify candidates based on strengths, capabilities, and commitment to the agreed goal. This provides transparency and fairness in the process of identifying a successor. The family should appoint a leader based on the individual’s strengths, ability, and commitment to the family’s collective ambition.
In some cases, there isn’t enough common ground to steer them to the next phase of the family business together and family members may agree to separate their business interests and set up individual businesses under a family conglomerate.
Regardless of which family member is the best fit for taking the helm of the business, or if multiple family members split the business and take the lead in different subsidiaries, working together with a collective ambition can ensure the longevity and security of the family's legacy.
