Every family business needs to nurture something identical that would cultivate a culture conducive to growth and longevity.
Family businesses in developed and emerging markets are thriving, and many of them have become market leaders. We can expect to see more family businesses leading the market in the future.
Their high performance is just inevitable, thanks to the positive traits of family businesses: resilient, less likely to layoff, long-term strategic plan, higher profitability in the long run, more engaged in community activities, financially conservative, and purposeful in creating a legacy for future generations.
Understanding these impressive winning qualities of family businesses isn’t enough unless we also create and nurture a family business culture that is conducive to growth.
According to data from Harvard Business School, two-thirds of all business enterprises in the world are family owned. Approximately, 70 to 90 percent of the global GDP is generated by family businesses. And about 50 to 80 percent of jobs in the world are created by family businesses.
How about in the United States? Studies showed that in the U.S. alone, 35 percent of Fortune 500 companies are family-owned and controlled, and 80 to 90 percent of business enterprises are family owned. Their output makes up 64 percent of the GDP (Gross Domestic Product) and absorbs 62 percent of employment. They also make up 78 percent of the new jobs.
It’s common for family businesses in developed markets, like in Northern America and Western Europe, to be managed by hired professionals. The growth of such family businesses would allow the family members to eventually morph into owners-managers and owners-investors.
The thing is, in emerging markets, such as Asia, Middle East, and Africa, family businesses are managed by family members, and it likely would remain that way. Cultural and lifestyle differences play significant roles in this. This phenomenon is known to have turned business studies performed in developed countries upside down.
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Of course, there is nothing wrong with it. It’s just a fact that business researchers and advisers must be aware of as many variables must be re-studied and recommendations that work in developed markets may not be working in emerging markets. For business advisers, it would require different approaches to providing solutions.
According to Vikram Bhalla of Boston Consulting Group, either way, a family business needs one thing in common: a universal ambiance of stewardship.
Yes, stewardship. Not greed. Profits are important. And equally important is having the right purposes other than profits. The spirit of stewardship must come from a place of readiness to perform well that would create a legacy for future generations. And it should be nurtured early on.
The global economy depends on the success of family businesses. Seeing this big picture, it’s our responsibility to ensure that family businesses would retain its importance in the future. Just like Planet Earth needs stewardship, family businesses do too.
How can you nurture stewardship in a family business?
1. Adopt Sophisticated Conflict Management Strategies That Focus on Merit and Fairness
You want to cultivate future leaders with strong stewardship in their blood. And the best leaders are both merit-conscious and fair. Use carrots, whenever possible. But yardsticks are sometimes needed too.
2. Increase Trust Between Family Members
Rivalries should be minimized, but not “hidden” under a peaceful facade. And one of the best ways to decrease and, eventually, eliminate rivalries and jealousy is by increasing trust. Do activities that build trust with each other, despite the ranks in the family.
3. Be Generous
Being generous allows you to practice trust, while also being fair. A good leader is generous to a certain extent and trust others that they can be trusted. Distinguish generosity from being a “doormat.” The former allows the giver to help those who truly need assistance aimed at rebuilding independence. The latter is simply being “too nice” and “couldn’t say no.”
4. Be More Patient
Patience is key to every success, as every competition must be handled with perseverance. And an essential element of perseverance if patience. Pay close attention to competitions. Being competitive is encouraged, as long as it’s positive and wouldn’t end up being bitter rivalries.
5. Remind Family Members of the Original Purpose of the Business
That original purpose is creating a positive legacy for many more generations to come. Things do change, and most likely the original purpose of the business has long been changed. Develop a new consensus on the purpose of the business, which should include being a good steward of the legacy.
The global economy depends on family businesses to thrive and be successful. Regardless of the hands-off or hands-on of the management style, every family business requires something identical: stewardship. And it can be nurtured with conflict management, trust, generosity, patience, and being purposeful. After all, we all can take active parts in sustaining the positive growth of the global economy. And having active stewardship is a good start.