Saturday, September 21, 2019
Helping Family Businesses succeed.
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Leadership Through the Generations

It comes as no surprise that family businesses look and act much different in their first generation than they do in successive generations. This is attributed to a variety of factors and priorities, including familial ties, the perception of fairness and the survival of the business itself. The leadership and management of the family business evolve over time as well, due to changing circumstances the business faces at various phases of its lifecycle.

Here is an overview of how ownership and management changes from an early stage family business to a later stage family business:

First Generation

Successive Generations

Ownership is strictly a family affair, with ownership shares distributed relatively equally among family members. Ownership is increasingly likely to be opened to non-family members and ownership may be concentrated inequitably within a smaller group.
Important decisions are driven by family owners. Important decisions are made by family owners and/or independent boards of directors.
Management is also exclusive or nearly exclusive to family members. Management and employment is open to individuals based on qualifications, expertise and skill sets, rather than on familial ties.
The business attempts to include as many family members as possible, with less emphasis on skills or qualifications.

Family members are often expected to participate. Departing the family business is sometimes viewed as leaving the family.

Family members are less expected to participate and are freer to pursue outside interests without offending the family.
A relatively flat organizational structure encourages decision making from all levels. A deeper, hierarchical organizational structure develops with more clearly defined job descriptions.

Emphasis is placed on building and preserving a family legacy and pride through family business ownership.

The importance of the family business legacy gives way to a priority placed on business performance.

Recognizing this evolutionary process is important because it can help your business understand how to prepare long-term management development strategies. What your family business looks like right now may not be what it will look like when you are ready to retire. Thinking ahead, however, you can begin to nurture future leaders for your business while keeping in mind the kind of business and management setting they will navigate in the generations to come.

Contributing Sources: http://wealthmanagement.com/family-business/business-succession-evolutionary-process; http://www.campdenfb.com/article/part-ii-governance-evolving-business-family

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