Three innovations for multi-generation family businesses
Recently surfing my files, I found two inspiring family business stories. The first was about Kongo Gumi, a temple-builder family business that lasted 14 centuries. Flexibility in selecting leaders was cited as a key to its survival since 578 with 40 family members leading the business for 1,400 years. That is definitely longevity.
The second story was about the Ingram family, owners of White Castle for 90 years. The Ingram family and their loyal “cravers” have grown together since 1921 through four generations of family members. Although many entrepreneurs would be pleased to survive through multi-generations like the Ingram and the Kongo families, the most-quoted statistics for family business survival tell a different tale:
- 40 percent of family-owned businesses survive to the second generation.
- 12 percent survive to the third generation.
- 3 percent survive to the fourth generation.
The importance of family businesses to the global economy remains high. According to a 2003 Mass Mutual survey, family businesses contribute 45 percent of GNP in North America; 65 percent GNP in the EU; 70 percent GNP in Latin America, and 82 percent GNP in Asia.
So what is the magic formula for survival? Well, as you already know there is no magic, but there are certain strategies that contribute more to succession survival than others.
Craig Aronoff in his book “The Final Test of Greatness” described the three most used plans of succession:
**Wheel chair plan: This occurs with an unexpected disability.
**Drop dead plan: We all know what anguish that entails.
**Sailing into the sunset plan: a much better alternative.
When Aronoff and Astrachan of the Cox Family Business Center researched multi-generational family-owned businesses, they found the correlation for succession is: a board of directors including outside members; a strategic plan in place; regular family meetings.
Strong innovative leadership is also required for thriving, surviving and sailing into the sunset. I believe all family businesses must connect their story, encourage emerging women leaders, and express urgent communication for change.
Innovation 1: Connect your story
My grandson, Sean, is a drummer, and I am his huge fan. Percussion is his passion and that means a set of world-famous Zildjian cymbals. After buying the cymbals as his birthday gift, I discovered a great story to educate Sean about the importance of family businesses to our economy. Avdis Zildjian Co., founded 14 generations ago (1623) in Constantinople, is the industry leader in making cymbals and is now located in Massachusetts. Sean enjoys sharing the story of his world-class cymbals made by the oldest family business in the United States. The connection of the sound with the business is priceless.
I encourage you to get in the habit of connecting your story early with next generations and share pride in your family business along with examples of other family businesses that provide the products and services affecting our daily lives.
Begin with White Castle, Zildjian, Meijer, Levi Strauss, Amway, Ping Golf, Martin Guitar, NASCAR and Bissell and add your own examples. Utilize technology to weave the family story into your gatherings. An added bonus will be that non-family employees and their families benefit by having a sense of belonging to something greater than the present.
Innovation 2: Encourage emerging women leaders
I may be stating the obvious, but overprotection of females is harmful to their success. Remember that even Dorothy in the 1939 “Wizard of Oz” was a leader. "She was small, meek, and young, but she took a guy with no heart, one with no brains, and one with no courage and created a successful team that accomplished its mission." (Spectrain.co.uk)
Today’s female leaders are neither meek nor looking for a wizard but are seeking opportunities in the family business.
The American Family Business Survey in 2007 said that: 24 percent of family businesses surveyed have a female CEO or president (up 14 percent from 2002 and a five-fold increase in women leaders in family business since 1997); 57 percent of all firms had women in top management team positions; and 31 percent of firms indicated they may have a female successor.
This compares to only 2.5 percent of Fortune 100 firms being led by women. (Fortune Magazine, April 30, 2007)
Women have a much greater chance of leadership in a family business than in non-family businesses. Molly Corbett Broad reminds us: “Great leadership is not limited by gender, it is limited by opportunity.” Consider the opportunities you are creating for the younger females in your family. Do you encourage them to eventually see themselves as potential leaders in the family business? What else can you add that will allow your business to someday capture that needed talent? If you are a woman leader, don’t rely on modeling alone — it helps, but be creative in planning for the next generation of females.
Innovation 3: Express urgent communication for change
A continual puzzlement for me is why more leaders don’t prepare people for needed change. A multi-national corporation, after spending lots of money to go through major organizational changes, repeatedly contacted me to help divisions because, in spite of wanting the change, people had gone back to their former ways. People prefer old comfort zones, and resistance comes from focusing on organizational, not human, change.
Volumes are written about change. I want you to remember that change is helping people move their comfort zones. Communication is the key to all successful transitions and is especially crucial in family businesses. Leading large and small changes requires preparation and thoughtfulness.
Consider these communication tips to get you started on the change process:
- Spend time preparing to announce the change explaining both risks and rewards.
- Anticipate that people will resist out of fear, but prepare to turn resistance into excitement.
- Listen, but don’t get sidetracked by hard-core resisters; I am talking here about those people who, if given the option at birth, would have responded “No way.”
- What you focus on you give power to.
- Change is a must; misery is optional.
Over many years of working with great leaders, I find that successful family business leaders do not “go it alone.” They regularly connect with peers, attend workshops and hire trusted advisors when needed. Mostly, great leaders appreciate the past, enjoy the present and innovate for the future.
Camille Donnelly was a cofounder of the West Michigan Family Business Council and is a sponsor of the Family Business Alliance. She can be reached at firstname.lastname@example.org or (616) 247-8368.