Building a Family Enterprise
Date:
Mar 13, 2014
Successful multi-generational families often have difficulty making the transition from a business-centric family to a family-centric enterprise as the scope of their activities expand, and the family grows across generations.
The diversity inherent in the growing group of shareholders brings the enterprise model to life. Some shareholders care most about the growth of the business capital; others care more about the growth of their social capital (and its impact on the community); and still others care more about the growth of the human capital and the development of each individual shareholder. The beauty of the family enterprise model is that it can support the interests of all family stakeholders - with a lot of creativity, flexibility and follow through on the part of the family.
A sophisticated family enterprise will organize itself around family goals and priorities that typically relate to preserving different types of family capital. The activities often center on common categories, such as those shown here:
The mental shift to an enterprise model is not easy for most families to make. They have to be able to see the endeavors of the family as part of a sophisticated enterprise that requires structured planning and a formal governance process for growing and preserving the capital. But making this transition is essential if the cousins are to stay together beyond three generations.
Groups of cousins with diverse interests and geographies have to formalize their commitment to each other and articulate the benefits of staying together for the long-term. A typical fourth generation family will have more than 50 family members and spouses sitting together at an annual assembly, trying to see a common vision of their future together and a way to make decisions for the good of the entire family. The process of evaluating whether or not to stay together and develop a rewarding family enterprise requires an honest exploration by the cousins to determine if there are compelling reasons for taking a long-term view and sustaining a renewable bond between the branches of the family.
This blog post is excerpted from the new FOX white paper, "Taking the Long-Term View of the Family Enterprise," which documents the characteristics of a family enterprise and provides a framework for you to consider as you manage the transition from a business-centric family to a family-centric enterprise.