We were lucky enough to be invited to appear at an extraordinary family business meeting. Campden Conferences of England pulled together notable family businesses from all over the world to meet together in Miami in February, 2008. The conference was unusual in that a family business couldn’t just apply, write a check, and sit in on the workshops. To get into a Campden conference, a family business has to qualify by virtue of the size and scope of its operation. This is quite rare in the world of business conferences, and many family business applicants had to be turned away. It was an impressive group to say the least.
There were closely held companies from Columbia, Mexico, Germany, Sweden, Argentina, Venezuela, and the USA. Among the group there was only one first generation entrepreneur; most of the companies were in their third generation or later, and one of the attendees was a sixth generation member of his family enterprise. The businesses ranged in size from about $70 million in sales to well over $3 billion. These were some of the most successful family and closely held companies in the entire world.
Their stories were all different and unique. At least one of the companies had gone broke in its not too distant past, some had been victims of political upheaval in their home countries necessitating the launch of new ventures in faraway lands, and some had suffered from untimely deaths requiring other family members to leap into the breach of leadership. There were, however, commonalities, some quite pronounced, among the businesses in attendance. Going further, it’s fair to say these practices were more than just “best practices.” They were universal; every single one of the successful businesses in attendance appeared to have the following characteristics. Here’s a quick rundown:
1. Every business had an active Board of Directors with at least one outsider among the members. How did they define outsider? An outside director is an objective, non-affiliated person. By non-affiliated, we mean the person isn’t a family member, is not nor has ever been an employee, and is not a paid advisor to the family business (i.e. attorney, CPA, banker, investment provider, etc). The objective boards were instrumental in the transition and growth of these family businesses as competition and their needs changed over the generations. The boards provided an excellent balance point between the senior and junior generations as issues of modernization, globalization, technology, and transition planning took place. The boards were instrumental in helping these companies develop strategies for reinvention as time and people passed.
2. Every one of the businesses in attendance had decided to be a “business first” organization as opposed to a “family first” organization. They had elected to put the needs of the business ahead of the needs of the family. That didn’t mean that family employment opportunities or wealth building opportunities were cut off – just the opposite. By focusing on the needs of the business first, wealth opportunities and success maximization opportunities were multiplied.
Being a business first organization means that family members aren’t employed in operations simply because of their bloodline. They have to qualify for their positions and be held accountable for their performance just as any other employee would (in fact, they may be held to a higher standard). Putting the business first doesn’t mean there can’t be love and harmony in the family. Rather, it is a pragmatic philosophy that separates the needs of the family from the needs of the business so that each can achieve its fullest potential.
3. Every business in attendance had successfully recruited and hired excellent non-family managers of the highest caliber and rewarded them handsomely with competitive pay, benefits, and retirement packages. They recognized that, while the entrepreneurial energy and enduring sense of values came from the family which created the company, they couldn’t go to the next level of success relying solely on the talent of one or a small handful of closely related people. They needed to reach outside the family to find new strengths and bolster weaknesses.
4. The businesses required, in fact mandated, accountability throughout their organizations including at the CEO and Board of Directors levels. On a true team, everyone has to pull his weight. When basketball teams compete, if one of the five players is lazy, doesn’t hustle, and doesn’t apply intensity to his defense, the other four players on the team suffer. It’s the same in business; you can’t have accountability on the shop floor or for your middle managers and not hold the CEO and the senior employees of the business just as accountable for their performance. It sends all the wrong messages throughout the organization.
What these multi-generation family enterprises had elected to do over time was undertake a serious effort at professionalizing their businesses. They all saw opportunities in the marketplace, and they concluded that it was in the best long term interest of the family to create a business which ran extremely well whether any of the family members showed up for work or not. They knew that by creating an entity which could at any time be put up for sale and be attractive to outsiders added to the opportunities and flexibility of the owning family. While many entrepreneurs fear that professionalizing their organizations and increasing accountability from top to bottom will choke off their entrepreneurial dreams and opportunities, these families have demonstrated that just the opposite is true; their opportunities have been multiplied by the fact they created independent, self-sustaining organizations.
Coming away from the conference we can’t help but be struck by the level of emotion, passion, and stewardship these families bring to their organizations. They’ve decided that they want to make their businesses perpetual and memorialize the family values that allowed them to become successful in the first place. By professionalizing their organizations, they found ways to maximize both. Organizing around the family business has allowed these families to continue to find an identity, share experiences, and share their uniqueness over the generations. Even though family members have elected to leave their hometowns or even leave their countries to pursue individual interests, the shared legacy of being a member of a business family allows them to come together periodically to enjoy each other socially and professionally, to preserve the values most near and dear to the family, and to enjoy the financial rewards associated with a multi-generation, sustainable closely held enterprise. To find the best of your family and your business simultaneously, it is wise to separate them so each can prosper while standing on its own.
Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.
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