Leadership Lessons from Great Family Businesses by ClaudioFernández-Aráoz, Sonny Iqbal, and Jörg ...

1. And yet family-owned or -controlled businesses play a key role in the global economy.

1.1. They account for an estimated 80% of companies worldwide and are the largest source of long-term employment in most countries.

2. The most successful family firms establish good governance as a baseline,

2.1. Preserve “family gravity,”

2.2. Identify and develop both family and nonfamily talent

2.3. Bring discipline to top-level succession

3. Large familyowned or family-controlled organizations that have prospered for decades, if not centuries.

4. Directos of family business boards gave themselves much lower performance ratings than members of nonfamily boards, especially in the area of talent management.

4.1. Fewer than 10% said their companies were effective at attracting, hiring, retaining, or firing employees or at leveraging diversity in the workforce.

5. According to the Family Business Institute:

5.1. 30% of these organizations last into a second generation.

5.2. 12% remain viable into a third.

5.3. 3% operate into the fourth generation or beyond.

5.4. Even those that do continue often see their value decline significantly when power changes hands at the top.

6. A Governance Baseline

6.1. Family businesses cannot hope to manage internal talent or attract the best outsiders without establishing good governance practices that separate the family and the business and ensure oversight from a professional board.

6.1.1. A quarter of the nonfamily executives about joining a family business: uncertainty about levels of autonomy, hidden agendas, lack of dynamism, and the potential for nepotism and irrational decisions.

6.2. Good governance is an obvious first hurdle for family businesses that want to hire and keep the best people and compete successfully over the long term.

7. “Family Gravity”

7.1. Although family businesses should match nonfamily ones in their governance structures and opportunities for professional growth, they must also be careful not to lose what makes them special.

7.2. Research shows it’s another critical factor in achieving long-term success.

7.3. The firms we studied usually have one key family member (but up to three) standing at the center of the organization.

7.4. They focus on the next generation, not the next quarter.

7.4.1. Embrace strategies that put customers and employees first and emphasize social responsibility and they have strong personalities that draw talented people into their orbits and keep them there.

8. Finding Future Leaders

8.1. Companies with sound governance and gravity should have no trouble attracting managers

8.2. The competencies most frequently required for success at the top of any sizable business include.

8.2.1. * Strategic orientation * Market insight * Results orientation * Customer impact * Collaboration and influence * Organizational development * Team leadership and change leadership. * In family businesses you should also look for people who understand the company’s ownership dynamics, accept that responsibility for multiple generations comes with the job, and are able to manage social ventures and sustainable growth.

8.3. Family members told us that when evaluating senior executive candidates, they considered cultural fit above all else

8.4. With family executives, in whom cultural fit was more easily found, the key concern was development.

8.5. The best family firms find their future leaders early and invest in them. Likely prospects are carefully brought up through the business so that when they’re ready for more-senior roles, the values and competencies match is a sure thing.

9. Disciplined CEO Succession

9.1. The greatest threat to any large corporation is a failed CEO succession.

9.2. Research shows that CEO appointments are far more successful when they follow a disciplined search involving multiple candidates.

9.3. Most of the companies followed a clear hierarchy when considering candidates, giving preference to family first, internal talent second, and external executives third.

9.4. The right transitional support can cut the risk of a failed hire or promotion in half.

9.5. Family firms must ensure that new CEOs are given adequate time to get to know the organization and its key players as well as to meet and bond with important family members.

9.6. A thoughtful onboarding process, along with a professional, fair selection system, can help a CEO succession unfold smoothly and effectively, creating value for the company rather than destroying it.

10. LEADERSHIP DECISIONS

10.1. Particularly at the very top, can be a minefield for family businesses. Companies can navigate safely and prosper for generations if they establish good governance as a baseline, preserve family gravity, identify and develop high-potential executives both within the family and outside it, and bring the right discipline to their CEO succession and integration processes.

10.2. Large, long-standing, publicly traded family businesses grow faster than nonfamily companies, are more resilient, and outperform market returns by several percentage points.

11. THREE NONFAMILY CEO ARCHETYPES

11.1. THE COUNTERPART

11.1.1. A true successor, who actively participates in shaping corporate strategy, works as an equal partner to the leading family members, and, over time, replaces them counterparts will create their own momentum and drive change in a family business while also helping to maintain its values and skillfully manage it

11.2. THE STEWARD

11.2.1. A manager who is never on an even playing field with the family but adds enormous value by executing its vision in an effective, professional manner stewards are ideal for business owners whose primary concern is to maintain their legacy and keep the existing operations

11.3. THE GOVERNOR

11.3.1. A leader who runs the business within a carefully crafted framework of governance governors prioritize day-to-day management over preserving the family’s values or spearheading strategic moves. the least common type, they are usually found in conglomerates and companies held by dispersed families with low equity

12. A DISCIPLINED SUCCESSION PROCESS

12.1. PHASE 1 DISCUSSION AND COMMITMENT BY THE SHAREHOLDERS

12.1.1. * Briefing on succession by owner family and/or the board, and analysis of possible scenarios Shareholder workshop to strategize about the future and design the succession process

12.1.2. * Creation of an ideal successor profile based on strategic goals, values, and desired competencies

12.2. PHASE 2 CANDIDATE SELECTION

12.2.1. * Identification and evaluation of a long list of suitable internal and external candidates Short-listing and obtaining references for a select group of qualified candidates

12.2.2. * Agreement on one or two finalists and contract negotiations with the chosen successor

12.3. PHASE 3 INTEGRATION AND DEVELOPMENT OF THE SUCCESSOR

12.3.1. * Establishment of an agenda for the first six to 12 months and selection of the top management team After 12 months, 360° feedback and, if needed, creation of a development plan to meet strategic and business targets after roughly two years

12.3.2. * Discussion and decision about renewing the CEO’s contract when due