The Staying Power of Family Businesses

Freida Staten V.P. of Marketing, Communications & Membership

The Staying Power of Family Businesses

Family businesses are known for their strong, distinctive cultures — cultures that are often heavily influenced by the founder’s vision, style, and values and carefully maintained throughout the generations. These cultures bind employees to a common cause and foster loyal and stable workforces. A strong culture can be a significant competitive advantage for a family business seeking to attract and retain the best talent to achieve sustainable long-term goals.

A strong culture can also be a liability. Every family business must examine whether its culture will survive in an environment of digital transformation and business model disruption.

A new KPMG study, The regenerative power of family businesses, explores the factors behind the resilience and enduring performance of family businesses, and how companies manage both tradition and change successfully. How do family businesses keep their founders’ entrepreneurial spirit alive and continue to grow from decade to decade and generation to generation? What is the secret to their staying power and ability to stay ahead of competitors?

The survey found there are three characteristics that help sustain a family business’ success, including a strong entrepreneurial orientation across generations, family connection and attachment to the business, and ambitious, next-generation leadership.

The report concludes with factors to consider that influence the regenerative power and future performance of your family business:

● The strength of a firm’s entrepreneurial orientation is one of the most important keys for unlocking the ability of a family business to continuously adapt, innovate, and grow. How would you score your company’s current level of entrepreneurialism? Is your company investing in research and development? Are you looking for opportunities to create innovative products, services, and processes?

Are you exploring untapped markets to develop new revenue streams?

● What impact are next-gen family members having on the direction of your business? Are they given opportunities to take risks and make judgments on their own?

● There is evidence that next-gen leaders, particularly young women, are digitally savvy. Have you recognized that capability in your company, and are you actively leveraging it to help drive technological innovations in your operations?

● A second critical component of transgenerational entrepreneurship and the regenerative power of family businesses is the family’s socioemotional wealth.

Are family members well-connected with the business? Are there new ways to keep them engaged in the business, through formal or informal roles or activities such as family events?

● Are your family members growing up in a stewardship climate to impart the purpose and values of the business and help each succeeding generation keep the business revitalized?

● How strong are their identification and emotional attachment with the legacy of the business and is its value as a family asset being encouraged? Are they motivated to contribute?

● Is it time to revitalize the leadership approach in your business? New leadership capabilities are emerging among Millennials and increasing numbers of female family members. Has their potential been recognized in your business? Are you taking steps to prepare them for future leadership roles? Is the value of increased diversity a factor in the long-term outlook for your company?

Family business owners want to create a company that makes a positive impact and ensures a legacy for future generations. They have earned a reputation for prioritizing their employees and the communities they serve. However, thriving in today’s world will require a change of mindset; a rethinking of their priorities and behaviors, including heightened investment in the digital tools needed for economic resilience; and a new definition of legacy. The world is changing, and so is the formula for lasting family business success. ■