Best Practices Common To Successful Family Businesses

“All happy families are alike; each unhappy family is unhappy in its own way

—Leo Tolstoy, Anna Karenina

 I recently read, again, this first sentence from Anna Karenina. Thinking about the truth of this statement as it pertains to family businesses, I have found much inspiration in: Perpetuating the Family Business, 50 Lessons Learned from Long-Lasting, Successful Families in Business by John L. Ward—quoted liberally here—to present six best practices common among successful multi-generational family enterprises:

  1. Establish a shared Intention to become a multi-generational concern.

By establishing an intention we declare an objective and foster a determination to succeed. This creates a focal point around which family members can coalesce, facilitating the birth of a long-term vision for the family and the business. Critically, this established intent places the responsibility on each new generation of leadership to pass the business on to the next in better condition than that in which they received it.

  1. “…Develop policies for family participation in the business -before the need.”[1]

“Long before the second generation is ready to come into the business, for example, the first generation develops and writes down on paper an employment policy that sets forth the requirements for family members who want to join and move up in the business. And long before the second generation enters the business, the first generation puts on paper a policy that guides decision making on compensation and performance appraisal issues.”[2]

  1. “…Enduring family businesses work very hard at defining a Sense of Purpose.”[3]

“They ask and discuss such questions as: Why are we doing this? Why are we working so hard? Why are we spending the time to develop policies? Why are we exerting so much energy to prepare for the future?”[4]

  1. Build Processes

“The capacity of a family to deal”[5] continually and “effectively”[6] with issues as they come up “will be a function of its skills as a group to communicate, solve problems, reach consensus, develop win–win solutions, and collaborate.”[7] It is “all the thinking and meeting and discussing that family members do together to resolve issues.”[8]

  1. Next-generation responsibility and leadership starts with good parenting.

“…One of the things that we can never underestimate is how much good parenting affects the future of a family business. After all, what is a family business about if it is not about the next generation?”[9]

  1. “Communication is Indispensable.”[10]

“Successful families recognize how profound, complicated, and perilous–and rewarding –communication can be. Business families with a long history of success are families that work very hard at communication.”[11]  They do this by maintaining open dialogue between family members—sharing family stories, writing family newsletters and other creative strategies that work for them. “Some once-successful family companies that lost their ability to continue as family firms lay that to a lack of sufficient communication.”[12]

Each of these practices is a scaffold upon which to build an enduring multi-generational family business. They are easy to write about and difficult to achieve. But having examples of workable strategies set by successful long-established businesses takes the guesswork out of what is necessary and provides guidelines to the possible.

[1] John L. Ward, 2004. Perpetuating the Family Business, 50 Lessons Learned from Long-Lasting, Successful Families in Business, Palgrave MacMillan, p. 23

[2] Ibid, p. 23

[3] Ibid, p. 24

[4] Ibid

[5] Ibid, p. 26

[6] Ibid

[7] Ibid

[8] Ibid

[9] Ibid, p. 27

[10] Ibid, p.15

[11] Ibid

[12] Ibid