The secret sauce for the survival of a family business from generation to generation has three main ingredients: Growth, Talent and Unity and it should be every founder/business leaders’ mantra especially for those pursuing 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).
As 8th Generation successor Jaime Augusto Zobel de Ayala (JAZA) of the formidable 184 year-old Ayala group when asked what he felt about family unity, remarked,
“Family unity is critical for business continuity. At the heart of this is careful and constant nurturing by inculcating the right values in the upbringing of children and maintaining bonds among siblings. We strengthen relationships between siblings and cousins by getting together on many different occasions. These gatherings build friendship and trust and also provide opportunities for educating the younger members about the family’s values and philosophy.”
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 value. Therefore, you need a plan to bring together the family behind the business, to strengthen trusting bonds and build family commitment to the enterprise. Fundamental disagreements can be managed in a respectful and careful way, ultimately with a commitment to preserve family unity.
Successful families are those who remain steadfastly united, keeping supportive members loyal to one another and to the family’s mission. Over time, as families become more diverse, it is likely that only a few relatives per generation will directly work in the business.
Inactive members can still support family philanthropic efforts or social activities, and sometimes that level of involvement is enough to maintain family unity. But investing on the next generation of family enterprise leaders can also keep talented members contributing to the broader family’s wealth and mission. All these initiatives to promote family harmony and longevity constitute a family plan.
I was once asked what a long term family plan means. This plan involves making a conscious decision to unite as a larger family. It involves identifying the larger family’s goals, understanding risks to accomplishing those goals and planning for the time when the family members become complex as they increase in number.
There are always challenges when a company is on the door step of transitioning from one generation to another and it is natural that each family member in any generation will have their own perspective on how the business should run moving forward. 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.
We can safely conclude that the real secret to a family fortune is permanence and permanence begins at home. 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. Indeed unity and commitment are every family’s competitive advantage.