Perspectives from ISB

A significant minority of highly successful business-owning families excel and thrive through several generations: Miele, Follett, Takanashi, Henkel, and many more. These families have much to teach us: not only on governance, strategy and business management, but also social and environmental responsibility and economic development.

So what are the features of family firms with sustained high performance over the decades or centuries? Some of the features are counter-intuitive. For example, it transpires that respecting tradition can help you be innovative; also, planning for the long-term helps nurture innovation. In another example, recently popularised by John Mackey, author of Conscious Capitalism, as ‘the paradox of profit’, a company does not tend to maximise profits by aiming to maximize profits. Rather, financial rewards come as a by-product of attention to product, service and customer. A succession of strong quarters is not always good for the business, as we saw in the credit crisis, if it is in dangerously risky trades. The smart business-owning families have understood this insight for centuries, and made it one of their unchanging principles.

The 25 principles of high-performing business-owning families fall into four broad categories:

  • Long-term success in the business – Vision, Entrepreneurial Drive, Business Skills, Employees, Ethics, Succession Process, and Adaptability.
  • Long-term continuity of the family- Pride, Mutual Support, Strong Values, Social Engagement, Fairness, Ability to Handle Conflict, Strength in Unity.
  • Long-term success in ownership- Trust, Control, the Equal/Unequal concept, Voting Rights, Responsible Ownership, and Equity Concentration.
  • What do successful firms do differently today? – Separation of Issues, Formal Processes, Stewardship, Governance Structures and Role of the Family.

 

A clear finding from the research is that the most successful business-owning families do not put profit-maximisation first. When you spend time with them, you notice that they have an intense pride for the business and its history. They also have a really deep sense of family, of unity, and how they can support one another. They have a strong sense of self; they do not try to be someone else. Their self-confidence is a quiet one, because they know that pride comes before a fall, and that modesty is, counter-intuitively, a natural ally of ambition.

For those seeking to emulate the most successful family firms, there are no easy, convenient benchmarks. Success is more to do with character and resilience. Aristotle defined three dimensions of human intelligence: episteme (intellect), techne (craft) and phronesis (practical wisdom and ethical values). It is clear that, for decades, business schools have taught the first two to the exclusion of the third. It is equally clear, from the evidence base on the most highly effective family firms, that Aristotle was right, and that phronesis ought to have parity in business education in the 21st Century.

Source: Kenyon-Rouvinez, Denise , ISBInsight, Volume 4, Issue 4, pp32-34

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