This is Part One of a four-part series.
A family business needs two major things in place if it wants to last, according to Pat Soldano, president of advocacy group Family Enterprise USA.
“If they don’t have succession and governance in place, generation after generation, they won’t survive,” the former family business consultant warned.
Governance has two sides: corporate and family. Corporate governance dictates how the business is run, while family governance, Soldano explained, “outlines how the family interacts with the business: Who’s in charge? Who does what? What are the rules around family members working in the business?”
This could also include buyout provisions for members who want to exit the business, too. “I don’t care if you’re the president, or manager, and you have a child who you want to work in the business, they have to follow that policy,” Soldano said. This avoids the appearance of nepotism and improves morale among all employees.
Read more: Shop profile: How family-run body shop sparked success
The succession side is more tricky to figure out. As a leader, deciding who should carry on your work determines not only the fate of the business, but likely many families, not just your own. A lifetime of hard work can be erased with the wrong appointment. Roman emperor Claudius wasn’t so bad, and even expanded into Britain, but more well known is the nephew he appointed as successor, Nero. It didn’t go so well. Rome burned, he fiddled, and then committed self-regicide, thus ending the Julio-Claudian dynasty.
That’s why along with inheriting sound rules of governance, the new heir must also receive strong core values, ones that the family both preaches and practices, to then pass down to their successor. One of those values, Soldano noted, needs to be innovation, a necessary pillar of any business built to last. If they do, “they’re going to be much more likely to be successful,” Saldano said.
No two families are alike, and what defines success, and how to pick successors, vary widely. To help you form your plan, we found family businesses ranging from 100 years old to 100 days young to discuss their road to success, strategies for promotion, and how they plan to leave something substantial for the next generation.
Read Part 2, a profile on a new family-run shop in Texas with plans to grow qucikly without losing its focus on customer service, here.
