Perspectives from ISB

The founder of every thriving family business faces an inevitable question: How should our ways of working evolve to meet the challenges of managing a growing company? Experts typically tell founders that the answer is to professionalize, meaning that they should emulate the structures, governance, systems, and processes of a modern corporation. Yet in many cases, that approach to professionalization destroys what made the family business special in the first place. Many founders also fear, justifiably, that they will lose control of a business that is an integral part of their identity.

It doesn’t have to be this way. We have a different perspective on what it means to professionalize a family business. In our view, such a business should start by determining which of its distinctive attributes—its entrepreneurial skills, its spirit, or its special strengths—have enabled the enterprise to thrive. It should then adopt the characteristics of a modern corporation that will augment those attributes and that fit with its culture. Professionalizing does not have to mean removing the family from its role in the business. But it does mean making a deliberate choice to define clear roles for the family and for professional managers. This approach will allow the business to benefit from uniqueness where it matters and prepare for scale where it is needed.

FOUR STEPS TO PROFESSIONALIZATION

  1. Define the Family’s Role- First, family members must agree on the need to professionalize and clarify their vision for the company’s future. They must align their aspirations for the business and for themselves.
  2. Strengthen Governance- Governance should be addressed at four levels, each of which must be clearly defined and consistent with the others; Family, Board of Directors, Corporate Center and Executive and Management Committee.
  3. Strengthen the Company- Professionalization requires strengthening the company itself. Several elements like Leadership Team, Organization Structure, Business and Support Processes and Control Systems are especially critical to a high-performing enterprise.
  4. Define the Company Way- In addition to the “hardwiring” described above, institutionalizing the company’s culture, values, and leadership behaviors is essential to successful professionalization. The leaders of the business must clearly and explicitly articulate their culture and values and then take steps to communicate and institutionalize them, with the goal of preserving them as guiding lights into the future.

Source: Bhalla, Vikram, and Orglmeister, Christian, the Boston Consulting Group, September 6, 2017; https://www.bcg.com/publications/2017/family-business-people-organization-founders-guide-professionalizing-family-business.aspx