It takes a sustained investment of time, energy and resources
W
hen
family businesses achieve a certain level of longevity and success, their attention commonly turns to legacy — the desire to create an enduring family enterprise with far-reaching positive benefits. With a legacy, a family's vision, ideals and impact can exist across generations, providing a source of pride for what the family has created together. Developing a multigenerational family legacy is a true process, not an event; successfully building a legacy comes from a sustained investment of time, energy and resources focused through strategic planning and hard work.
Building a legacy involves taking what you already have in place and then continuing to develop it for long-term success. While there is no one-size-fits-all strategy for any aspect of family business work, there are basic building blocks that any family will benefit from. You can think of these building blocks as providing a basic structure that needs to be tailored to your particular needs; every family will need to focus on the aspects that are most important to them. Visualize the elements below not as a checklist but as an idea framework that you can apply to your unique situation and goals.
There are three main areas to consider in legacy development:
â¢
Philosophy and Purpose
â¢
Structures and Strategy
â¢
Education and Development
I believe in beginning with philosophy and purpose, as each family must determine what their ultimate goals are, what ideals sit at the core of who they are, and what they want to be, thereby allowing their legacy to be built and perpetuated with clear intention. Having clarity about purpose allows proper structures and strategies to be established, thereby creating the organization for an actionable plan to be carried out. A family business's legacy is preserved and maintained by education and development programs that continually reinvest in the family's human capital. As we expand on each of these building blocks, take note of which ones your family's business already has in place, those that need updating or revitalizing, and those in which you have notable gaps.
PHILOSOPHY AND PURPOSE
To begin, I encourage family businesses to ask themselves questions that may seem simple on the surface but have the potential to spark deep and impactful conversations that will eventually lead to the foundation upon which the family's legacy is built. When reflecting on your vision, you can ask:
â¢
What do we want things to look like in the future?
â¢
Why do we have these goals?
â¢
What is most important to us in pursuit of those goals?
Answering these questions will likely require input from key members of your business, including your ownership group, executive team and board of directors. Clarifying your company's vision will help you understand what you're doing, why you're doing it and how you'll continue to do it (and do it better) in the future.
These introductory questions about your business's purpose also serve as the jumping-off point for a deeper conversation about family business values. Values, in many ways, create the culture of your legacy, with strong values often serving as a distinguishing factor of long-lasting, successful family enterprises. You may ask:
â¢
What are the values that exemplify who we are as a family?
â¢
What are the most important things to us as we build a legacy?
â¢
When other people think of us, what do we want them to recognize us for?
The values that you extrapolate from these questions will serve as a grounding philosophical force in your family business, cementing the foundation upon which you can implement guidelines for interactions and decision-making.
As family businesses grow, guidelines become increasingly necessary because of a variety of factors that complicate the decision-making and communication processes. Additional viewpoints, generational perspectives and various motivating factors all lead to an environment in which there are multiple communication approaches that need guidelines to manage effectively.
When constructing your own guidelines for communication, ask yourself:
â¢
How do we want to treat one another in this family?
â¢
How will we make decisions together in an effective and fair manner?
â¢
What will be our system of communication for constructive criticism?
Strong guidelines help family businesses to increase their internal accountability and allow them to maintain the culture and values they espouse. Fair process guidelines will support quality conversations and allow for effective decision-making. When agile communication guidelines are in place, everyone in the business and in the family will feel as though their voices can be heard. This is most important during large-scale conversations about the future of the family business. Ideally, during these conversations, all family members will feel as if they have a voice and are supported in their participation in group discussions.
A legacy is intrinsically tied to a clear philosophy and purpose because it ensures that a business's functions and goals will persist even after individual contributors may exit the company. This means that even after a founder or CEO retires, their grandchildren will still carry on with the same ideals and intentions, cementing the business's legacy.
STRATEGY AND STRUCTURES
The next step in securing your family business's legacy is to develop both the strategies and the structures that will carry forth the concepts of your philosophy and purpose. You can think of your strategy and structure as the road map for achieving your goals. This is known as proactive planning — envisioning your desired future state and then developing a strategic plan to get you there. When discussing your desired future state, ask:
â¢
What are actionable things we need to do to achieve our legacy?
â¢
Who is involved, and in what way(s)?
â¢
What are the milestones we can track along the way?
Based on your answers to these questions, you can establish plans that make sense of the complexity of family business realities. These plans will be organized around the key aspects necessary for success, such as clear goals, structures, timelines and personnel. While the specifics of strategic plans may look different for each family, they all have the same goal in mind: organizing the developmental efforts across the systems to achieve the desired vision.
Many times, these plans will be oriented around major transitions within the organization and are designed to support the continuity of individuals and groups. The most effective strategic plans are created in a collaborative and proactive manner, designed to be implemented before any major tensions arise. That being said, many times plans of this nature are developed in response to less-than-optimal events or interactions. These negative interactions may have been avoided or mitigated with advanced thinking, thus highlighting the benefit of proactive strategic planning.
Within any business, strategic plans are often reliant on governance structures to ensure that they are implemented and managed properly. Governance is the foundational way for family legacies to organize themselves and make the best strategic decisions for the family. In a family business, you will ideally have two separate forms of governance: a board of directors to govern the business, and a family or ownership council to govern the family. Together, these forms of governance will collaborate to discuss current and future plans, ensuring that the best decisions possible are made for the family business as a whole.
When both your family and business governance forms are functioning to the best of their abilities, the communication and decision-making process will be streamlined and efficient. Independent board members can be an invaluable resource to your board, bringing in professional experience and an objective perspective in order to best support the creation of your legacy. Additionally, an effective family or ownership council will serve as the primary means for the ownership group to remain engaged, informed and present in their responsibilities as owners.
As with discussions among individuals within the business, healthy communication between the different forms of governance is essential for productive action. The interactions among the board of directors, the family council and the ownership group are guided by clearly defined roles and responsibilities. These guidelines can be delineated in a document that might include a decision-making matrix: a structure that establishes who makes what decisions, who has input on those decisions and who is to be informed of them. Clarity around roles, responsibilities and decisions is a vital aspect of healthy, long-term systems, while a lack of understanding on this matter is often the source of much consternation for families.
EDUCATION AND DEVELOPMENT
In order for a family legacy to last beyond prior generations, there must be a constant investment in the family's own education and development. Families by their nature grow and evolve over time — they are dynamic by definition. Supporting the ongoing education of individuals and the family as a whole is a powerful strategy to foster engagement and human capital development. A commitment to ongoing education means focusing on:
â¢
Family business concepts (including vision, purpose, and philosophy)
â¢
Decision-making and effective processes
â¢
Communication and interpersonal dynamics
The most effective and successful family businesses invest not only in conceptual knowledge but also in their own interpersonal capabilities. Because of the inherent complexity and dynamic nature of family businesses, constant reinvestment in skills and behaviors is essential in ensuring that the family possesses the ability to work effectively with one another over the long term.
Communication and conflict management skills are ways that families can invest in their own interactions, which can pay long-term dividends. This type of education will also directly carry down to future generations, as children will be raised in families that have put in the time and effort to communicate better. Of course, no family will agree on everything, but all families can create an environment that values respect and healthy communication, and that possesses the skills to manage disagreements.
Efforts made in this area are essential to creating and sustaining a legacy. If family members cannot interact effectively, eventually the strain of bad dynamics will lead people to exit the system. Family members must want to work together toward their goals, and strife is not conducive to people investing their time and energy. The best strategies and structures in the world won't work if people don't like interacting with one another.
START WITH THE BUILDING BLOCKS
The ideas here provide a framework within which you must consider how they apply to the innate uniqueness and individuality of your family. What one family business seeks to achieve may be different from another and so will be the path for how they get there. But the common elements involved in family business legacy success can provide a starting place for considering your philosophy and purpose, what structures and strategy will help you achieve your goals and what education and development is needed to grow your human capital. Many family businesses are defined by the desire to achieve a legacy from the opportunities afforded to them. Addressing these building blocks in a thoughtful manner will ensure that your efforts stand the test of time and create a true and lasting legacy for generations ahead.
Joshua Nacht is a senior consultant at The Family Business Consultinng Group
Bookmark/Search this post with
Audio Sound Duration:
00:00
Issue:
July/August 2023
-
1692 reads