Abiola Adediran: How Your Family Business Can Thrive Amid Economic Challenges

Families that have survived in business for generations generally emphasise their stewardship of the family enterprise, which means taking care of the family business and passing it on to the next generation. Given the rapidity industries transform, businesses turn over, technologies advance, generational interests evolve and family members’ capabilities change, stewardship needs to be redefined as doing what you can in each generation to build multiple kinds of value — financial, intellectual property, social impact, relational and talent. This requires thinking about the family enterprise as a portfolio of assets and activities, not just the family’s legacy business, with shared values that guide the way and unite the family through pride and commitment.

Failure to approach stewardship in this manner could lead to unfortunate cases of failing family businesses and legacy companies when it’s declining and conditions can’t be improved. In these situations, the family usually goes down with the ship, they lose value and reputation, family members lose confidence and the unity in the family gets damaged.

Many enterprising families recognise the need to transform themselves for turbulent times. They invent some key strategies for successfully implementing a values-driven model for family enterprises’ success in this decade.

Reorient and retool your owners

Enterprising families cannot afford to take their hands off the wheel during these challenging times when owner-level decisions (such as where to bet their capital, who to partner with, how much risk to take and who should lead the enterprise) will account for most of a family enterprise’s gains or losses. They need to recognise that good owners add value and are critical to the success of the family enterprise.

All owners need to take their jobs seriously and be equipped to do them well. Active owners with the experience and capabilities to steer the family enterprise must be deeply engaged in strategic direction-setting and oversight. They too must be well equipped, with the mindsets, skills and networks required for success in today’s fast-changing, hyper-connected world.

The family is responsible for grooming and preparing owners’ talent in the senior and next generations. Unfortunately, most owners don’t understand their legal responsibilities or their rights, either because they haven’t been told or because ownership is viewed as a passive role, a birthright with financial benefits and no real accountability.

Owners can delegate some decisions to boards and management and should get outside advice as needed, but they cannot delegate their ultimate accountability for family enterprise sustainability. The roles of owners, governance groups and management should be delineated to ensure that owners respect the role of their boards and don’t wander into managerial operating issues.

Get ready to pivot

The game of business has changed in this turbulent era. The instant ability to address threats and seize opportunities as they arise will separate winners from losers. The pivoting may range from an operational innovation to a whole new business model. That is, investing in an entirely new business. But one thing is certain: If your family enterprise is not capable of shifting direction quickly in response to changing conditions, it might not last.

Family enterprises need to be in a state of constant exploration, with an eye for the future. Strategic foresight, which has its roots in scenario planning, is a valuable tool for that purpose. It is essentially a systematic and data-driven way to use ideas about the future and emerging trends to anticipate and better prepare for change and disruptions. With it, you develop a point of view on what will likely happen, identify strategic options and make decisions.

A deep dive into those scenarios will allow you to identify plausible options, articulate your point of view about the future of your family enterprise, and devise strategies with the capital, talent and alliances needed for your transformation journey. Planning should consider probable events and actions and be continuously refined in response to changing conditions.

It’s important to integrate strategic foresight into your family enterprise’s ongoing processes and culture. Board and investment committee members, senior executives and owners should be involved. Your family enterprise portfolio and organization must both have the agility needed to address threats and seize opportunities as they arise, with an eye firmly fixed on your family’s mission, values and vision.

Accelerate your digital transformation

Increasingly, family companies need to adopt digital technologies to foster innovation and remain competitive. The digitalisation of processes and products or services can increase organisational agility, innovation and productivity, enhance customer and employee experiences, turn data into business intelligence, and provide the basis for creating new value-creation models.

On the family side, digitalisation can enhance communications among geographically dispersed family members and streamline administrative work. On the asset management side, wealth management platforms and administrative software can improve investment decision-making and portfolio management.

Family enterprises must move quickly and take a strategic, systematic approach to digital transformation. Digitalisation should be elevated to the owner level for leadership and strategic decision-making. Digital transformation roadmaps need to be developed and successfully implemented, with attention to reaping the benefits of digitalisation while also ensuring that cybersecurity risks are fully understood and addressed.

Make social impact a priority

The family enterprise is the driver of engaged, socially responsible participation in our societal fabric and economic endeavours. Your enterprising family can make a positive difference in the world and enhance your legacy by making social impact a priority and taking a strategic and holistic approach to it, across the entire family enterprise. ESG practices should be high on the agendas of operating companies. The integration of sustainable investing into families’ financial portfolios is an extension of this ethos.

Your businesses, your philanthropic efforts and even your lifestyle all contribute to your family’s net social impact. Enterprising families’ net impact is enhanced when it is coordinated among all family enterprise activities and strategically focused on making the best use of your resources for social good, in ways that are anchored in your family’s mission and values.

Creating a positive social impact legacy is a multigenerational journey for the entire family and family enterprise. It will evolve as the external context and your family’s goals, capabilities and resources change. And, almost inevitably, it will require trade-offs among competing needs and priorities.

Mobilising for your social impact journey begins by activating family members. Owners should organize family discussions about the importance of social impact, how you can express your family’s values and mission through social impact activities, and the family’s social impact goals. Enthusiastic family members can be invited to form a committee to drive the initiative forward.

Developing and successfully implementing your social impact strategy will require that family members be aligned around a definition of success. You will then need to establish measurable goals; define a manageable scope of activities; identify funding sources; and develop an action plan with clear accountabilities, impact metrics, and mechanisms for periodic assessments and adjustments.

Engage and revitalise your family

Families are the bedrock of family enterprises. If family members are not engaged, enthusiastic, contributing, united and willing to continue as a business family, the enterprise will collapse. But families, like any group or organisation, will change over time and especially over generations. They need to be revitalised to maintain their strengths and build new ones.

Enterprising families are increasingly diverse on many fronts; education, skills and experience; values and priorities; career, family and life goals: geographic dispersion; lifestyle choices; racial and gender identity; and perspectives on politics, religion and any number of other topics. That diversity brings many benefits, from more interesting dinner table conversations to important contributions to the family enterprise and its future.

Family leaders need to embrace this diversity both to preserve family unity and to tap into a rich pool of talent for the family enterprise. They also need to ensure that individual family members share the core values of the family and its commitment to the success of their family and family enterprise while being open to different ideas. In some cases, that may require reassessing some important family tenets, such as the traditional role of women as owners and leaders.

Family leaders who successfully harness the diversity of their families do several things well. They prioritize inclusion and develop principles and policies that explicitly embrace human diversity. They cultivate personal relationships that express their welcoming of others and convey to family members that they belong. They ensure that the family enterprise offers a variety of roles, help identify where individual family members can contribute and invest in family talent development. They keep their finger on the pulse of how their family is changing and remain open to ideas about new activities.

Enterprising families need to take a more proactive and flexible approach to engage and exciting next-generation members by starting the engagement earlier, building a family talent development program, revitalising your family mission and developing a team culture in your family. Remember, it is best to invite and encourage — not obligate — family members’ involvement.

Surviving and succeeding in the new turbulent era requires nearly constant adaptation as well as some significant transformation by family enterprises. Many of the biggest adjustments that family enterprise systems need to make are attitudinal. Owners and their boards need to adopt an owner mindset to gain altitude and perspective, look to the future and try to get ahead of changes roiling the world. Active owners need to take the reins and lead the transformation journey. There is no time to waste.

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Feature image: Paul Efe for Pexels