Family Leadership Brand: Ensuring Value and Continuity through Leadership
By: Raul Serebrenik, Rodrigo Calderon, Ernesto Uscher
It is well known that most family businesses do not last past the third generation, either because the business fails or because the family sells it or destroys it. Hence, studying family businesses that last multiple generations — even centuries — teaches secrets on how to last and succeed.
This is what both of our firms, FECIG (Family Enterprise Consulting International Group) and The RBL Group have done for more than 25 years: assisting and studying successful long-lasting businesses — privately or publicly owned — all over the world.
When we focus on family businesses, we must look at examples in Europe and Asia. More families have lived and operated their businesses for many generations in those regions than in other countries. A special case is Japan, where a long-term family business ecosystem flourishes: More than 50,000 centennial organizations are still controlled by founding family members.
These Japanese families not only run their business well; they also show a culture that both honors the family legacy — and takes care of it — and is fully committed to developing the leaders of the next generation, starting from an early age until they take command of the organization. It is no surprise then when we see that some of them are in the twentieth or thirtieth generation.
Of course, the Japanese culture gives more importance to collective success (societal, familiar) than that of its individuals, helping to nurture these long-lasting family businesses, although it is not the only cause for it. When studying these organizations, we find documents that show governance agreements clearly indicating both the privileges and duties of family members at different life stages and what personal attributes they need to develop according to the different roles they want to play in the family organization. And, perhaps more importantly, we find how these documents evolve as the family and the business adapt to the different challenges they face at different moments in time.
In essence, Japanese family businesses last by a committed and continuous design to do so. It was not by chance that a “great natural leader” took command of each generation because they invested the time and effort to develop the leadership they require for today and tomorrow. And they do it all the time.
Another example can be seen in Europe’s long-lasting families. A well-known example is the British royal family: After Queen Elizabeth II died, the support and respect the British people had for her was easy to see in broadcasted coverage. A significant explanation comes from the leadership attributes that were recognized and embraced fully by her successor as important to the country and the people (i.e., a devotion to serving the country and its people at all times, modeling a continuous sense of well-being and good future possibility at every circumstance without interfering in day-to-day politics, and aiding the prime minister no matter who held the position).
Also, we see how the rules of duty and privilege have changed as families changed roles due to personal preference (i.e, Prince Harry) or because behavior didn’t reflect the values of the crown (i.e., Prince Andrew). Furthermore, we see how the next generation is getting ready and how the following generation is being prepared. So, while we can argue the pros and cons of the monarchy (and also expect their behavior to evolve), it appears that the majority of the British people still support them. That support is founded in the absolute commitment of the current king and his family to do what is necessary to preserve the nation’s and family’s legacy (and all the privileges they get from it).
Now, if we look at the common protocols through which a lot of families today expect to ensure the continuity of their family businesses, we can see that most of them establish clear rules. These rules among family members relate to three basic things: family affairs, the family estate, and the family businesses. These protocols provide a legal and/or moral contract on who gets what, who can decide what, how business governance is expected, who manages the estate, what pieces of family legacy are to be preserved, which services or privileges are provided to family members and who is entitled to them, succession planning at all roles assigned to family members, and what is to be kept in common and what goes to each family member whenever someone retires or dies.
These protocols are necessary and useful, especially as the family grows and expands, because they give family members clarity on how to relate to their family, ensure transparency from the management of all family aspects, and set clear expectations on some privileges and duties.
However, most of these protocols don’t answer some key questions on how new generations contribute now and how they need to be developed so that their contributions are positive when they take their elders’ roles. Furthermore, constructive conversations between generations are often missing (even to the extreme that when someone has a question, they don’t talk to their elders but talk to the custodian of the protocols or follow the protocols rigorously instead of going to the senior family leader). We have seen many cases where new generations feel that there is no chance for them to connect with their elders and vice versa, and many of the younger generations devote energies to non-family ventures or just wait for their turn while using passive-aggressive behavior against their elders’ decisions, which diminish possibilities for everyone. Family politics are definitely not a good sign for a long-lasting family business.
And why is this so? Our work at FECIG for over 20 years with families that own businesses, realized that these protocols don’t include other very important components of family wealth, specifically the intangible assets. When we study the long-lasting families in Japan or Europe we find that goodwill, networking, reputation, knowledge, education and leadership, among others, bind the real cornerstone for their continuous development and success.
Hence, we have built a multi-capital model of family legacy, including the different aspects required for family legacy to be sustainable across generations.
These 8 capitals, as explained in the figure, interact with each other and are key to delivering value to the multiple stakeholders the family relates to, including the family members. It includes a spiritual capital
So, how should we complement the family constitutions to improve business success, and members’ well-being, and continue the family legacy? As the model shows us, building intangible capital is vital. At The RBL Group, we’ve worked for more than 30 years building, at many major organizations globally, the intangible value that materializes in both, competitive advantages and business value. We’ve done this by helping leaders align how everybody thinks, behaves, and work, so that we deliver value to customers, investors, and major stakeholders. Furthermore, we understand that having great leaders matters, but building leadership as the differentiating capability to attract and develop the leaders we need for today and tomorrow, matters even more to build sustainable value.
We have helped many of the biggest companies in the world develop their leadership capabilities so that all their leaders share the specific attributes needed for them to achieve results today and tomorrow, even with different market disruptions.
The process we follow begins with understanding why leadership matters at each organization we work with through a constructive dialogue that enables leadership teams to confront the external realities and trends with what the organization wants to achieve and how they can adapt their current resources to make it happen.
The resulting leadership attributes work as a distinctive seal — a Leadership Brand — that when brought alive by every leader in the organization ensures the successful experiences by employees and customers that support great business results.
In essence, it becomes a seal that everyone can develop on a personal and collective level.
The same process has been successfully applied and deployed by Family Businesses. Through very deep and thorough interactions and inter-generational dialogue, we define what we call the Family Leadership Brand (FLB). We start with a clear inter-generational dialogue about why leadership matters, as it takes care of the family’s legacy, impact and reputation. What we care about, who we need to become to take care of now and in the future, and how we develop ourselves to fulfill that promise is at the core of the conversation. It is a branding exercise that provides clarity on our family name’s value now and in the future.
This FLB creates the same clear purposes we see in long-lasting family businesses in Europe and Asia. It creates agreements on who their members need to become so that the family, the business, and the estate are preserved and enhanced in today’s world.
Through a solid FLB, family organizations:
- Create a commitment to continuity and improvement of the family legacy: “We are stronger together.”
- Provide transparent governance agreements, where the outcome is more important than the contract, that are both agile to adapt to new times and situations and clear and simple to be easily communicated and enforced.
- Become open to new possibilities while taking care of the legacy and are directed by the right leadership at each moment for the family and its businesses.
- Translate their leaders’ and members’ behaviors into business results and social impact by developing the specific attributes needed to fulfill the value propositions they make.
- Generate confidence that all their leaders today and tomorrow will do what is necessary to take care of the family values and their business promises because they know what is important and how to make it happen.
- Provide a continuous learning and enhancement environment where leaders are always developing their attributes and the different family organizations’ capabilities to positively impact their stakeholders and business results.
- Adapt quickly to major shifts in their business and social environments; they are always sensing what their stakeholders value and what is being done for them as well as involving the point-of-view of stakeholders to refine value propositions and immediately develop their leaders to fulfill it.
Furthermore, we have seen some clear advantages achieved by families that have a clear FLB developed by intergenerational dialogue:
- Connect future possibilities with today’s reality while preserving essential legacy: The FLB exercise focuses on what the family wants and needs to achieve in the future, both short and long-term. The basic premise, “What brought us here won’t necessarily take us there,” is followed so that everyone in the family connects to develop the future and improve the business, as well as to learn and develop themselves and other family leaders in achieving that future.
- Enhance inclusion for all family members’ interests: Clarity on what is needed from family members in each of the different roles allows everyone to choose how much and in which role “I want to play.” Also, as in a family, you want everyone to be happy and willing to be an integral part. As the family expands and diversifies, we ask the question of what value proposition (business or personal venture) each member has for the family and what this person wants to achieve with the family or by herself. This allows a dialogue that preserves family legacy and integrity while opening up to new innovations or entrepreneurship with the goal that everybody in the family can lead something for the family. In essence, people that take part in the dialogue that articulates an FLB tend to be closer to the family even when they don’t work with the family.
- Accelerate personal and professional development for everyone: Having clarity on the FLB and its attributes allow the design and implementation of experiences, skills, networking, studies, work assignments, projects, and career paths that family members need individually and collectively to become people that live the FLB so that they can own the specific role they play or are expected to play. The FLB is an essential tool for the human capital development within the family, which is as critical as financial capital to pursue business success.
- FLB aligns leadership of all family entities: As an FLB brings clarity on what the family values and the future they want to create, different family entities, including businesses, can align their personal leadership brand with that FLB. Then being part of the family becomes a positive differentiator from a cultural and leadership point of view, and these entities’ leaders live by family values and purposes. Experience tells us that when different entities have different cultures — and leadership is the essential cultural carrier in today’s organizations — the possibilities for them to split or to end up embracing cultures that don’t reflect family values are significant. We always pursue the “we are stronger together” adage that so many long-lasting family businesses follow.
In essence, a family that establishes a constructive inter-generational dialogue — that includes who they are and who they need to become so that their businesses and people thrive — has a much higher potential to last many generations successfully.
Our invitation, from The RBL Group and FECIG, is that you and your family learn more about this short-term process. Articulating an FLB can take from three to six months and, without complexity, addresses some of the main issues family business owners face today.
If you want to learn more, please contact us at:
Raul Serebrenik raul.serebrenik@fecig.com
Rodrigo Calderon rcalderon@rbl.net
Ernesto Uscher euscher@rbl.net