Why building family unity is key

“THE secret sauce for the survival of a family business from generation to generation has three main ingredients: growth, talent and unity. It should be your mantra if you want multigenerational success.”

Family unity has been documented as an important characteristic of successful and enduring family businesses. Family pride, personal sacrifice, loyalty and reputation are valuable factors which influence business operations, especially their continuity during periods of hardship (Donnelly, 1964).

Is the family keeping the business together or, is it the business that is keeping the family together?

Family feuds that result in ownership splits weaken a family and greatly reduce its assets and returns. You need a program to bring together the family behind the business, to strengthen trusting bonds and build family commitment to your company. A good shareholder agreement is very useful. Fundamental disagreements must be managed in a respectful and careful way, ultimately with a commitment to preserve family unity and assets.

Successful families are those who remain reasonably united, keeping supportive members loyal to one another and to the family’s mission. Over generations, as families become more diverse, it is likely that only a few relatives per generation will directly work in the business. Outside-the-business members might still support family philanthropic efforts or social activities, and sometimes that level of involvement is enough to maintain family unity. But investing in family entrepreneurs can also keep talented members contributing to the broader family’s wealth and mission. In the course of my coaching engagement in the Asean region, the Philippines included, I have noticed that the new millennial generation—ages 15 to 30—seems especially interested in being entrepreneurs.

What is a long term family wealth plan?

This plan involves making a conscious decision to unite as a larger family to plan for the benefit of the larger family through the fourth generation into the future. It involves identifying the larger family’s goals, understanding risks to accomplishing those goals, planning for the time when the family members grow in numbers, more spread out and less cohesive and it involves working outside of the immediate family unit.

There are always challenges when a company is on the door step of transferring from one generation to another. Many companies often start with the legal side of the transfer but from experience, the first place to start is by gaining agreement across all generations on the business plan for the organization under the leadership of the
incoming generation.

It’s natural that each family member in any generation will have their own perspective on how the business should run moving forward. It’s the companies that talk through those perspectives to gain agreement on one plan that will set their family up for prosperity for many generations to come. Developing a plan will lead to increased profitability which provides more options for the family and the company to work through any leadership or ownership transfer issues.

You might say that the real secret to a family fortune is permanence. Permanence begins at home. And family wealth fails because families fail.

The oldest businesses in the world are family businesses that have been successful mainly due to the resilience and united stand of the family members even in the face of seemingly insurmountable obstacles brought about by modernization and globalization. The Antinori business in Florence and the Barovier & Toso glass-making business in Murano have produced some 20 succeeding generations of owner-managers from the same family. Cargill, a family business founded in the United States in 1865 now has revenues exceeding $50 billion and employs nearly 100,000 employees around the world. For the most part, the descendants of the founder now in their fourth or fifth generation have run the family business throughout its life.

Imagine if your wealth suddenly disappeared. Would your family members rally by your side to help rebuild the family fortune? The Rothschild family was able to survive and grow its family wealth for 250 years. Over the years, various branches of the banking business failed. But there was always a Rothschild family member somewhere who helped the family business survive and thrive.

Do your family members have what it takes to get back the family fortune? If the answer is no, what lessons should they learn? Perhaps, if they’re lucky they don’t have to be wealth creators. But if they lack even the potential to be wealth creators, they are unlikely to preserve the family wealth for long. And when family fortunes are lost, it’s usually the family that falls apart. The problems are almost always family-centered, not money-centered. And that’s why the solutions can’t come from outside the family. They need to come from the inside. Outside professionals can help temporarily but sometimes, when the family does turn to outside help, it is often too late.


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