The Next Level of Sustainability for Family Businesses.
Family Businesses make up almost two-thirds of all businesses globally according to research. This makes family businesses a key contributor to the global economy and employs a large portion of the global population.
It is my firm belief that family businesses globally have a huge opportunity to scale up despite the pandemic we are facing globally.
The purpose of this article is to highlight a common pattern of challenges family businesses face and what they need to do to recalibrate moving forward applying some simple governance practices in order to have accountability, clarity, and the ability to scale up with ease.
Here are some of the key challenges’ family businesses face:
This seems to be a key challenge many family businesses face. They stagnate and have difficulty focusing on the critical growth-driven aspects of their business. They are bogged down to the day-to-day operations and are short term thinkers. This can be a huge disadvantage given the fact that competition can have an edge applying forward-looking strategies and using the most current set of tools and resources to forge forward.
Lack of Leadership Skills
This is by far one of the biggest challenges many family businesses face. There have been instances from our experience helping family businesses grow, where the owners do not have a clear collective vision as well as specific goals and objectives. They heavily rely on linear forecasts which their finance team produces in most instances. The expectations are not properly thought through leading to unmet expectations resulting in stress and frustration.
There is no proper appraisal at the top to help the owner course-correct where appropriate.
Lonely at the Top
Many business owners do not have the right mentors and/or coaches. They also have challenges with the networks they interact with. In one instance, a successful business owner was frustrated for not being able to express his feelings regarding some elements of his business operations. This led to health challenges and him getting angry, reacting at every small issue.
Poor Return on Executive Time
A huge leakage in cash flows occurs because of the extremely low return of executive time. At times, we have noted some executives and managers who ‘drag’ the growth of the business. There is lack of sound appraisal and fear of losing team members causing a void in deliverables. In one firm, the head of sales was extremely convincing in meetings and had answers for all the expectations he failed to meet. The owner was always convinced with his responses. Of course, the company did struggle due to weak leadership.
Many family businesses face a big challenge when it comes to finding the right team members with adequate skills to execute with efficiency and make a positive impact overall. In some countries where certain competencies are hard to find, family businesses compromise by loosening up the requirements to get a good candidate.
The above are some of the multiple challenges that family businesses face. One of the turning points that many family businesses should consider is having a loosely defined governance structure in their business.
Why Governance for Family Businesses?
There are various definitions of governance but one that resonates is translating your company vision into reality. This basically sums up in one sentence as to the broadest element for company growth.
Firstly, Governance for family businesses is not expected to be a full-fledged expensive setup for your business. The intention is to have a sustainable, growth-driven business model in place with a sound leadership pipeline in place.
It depends on the size and complexity of your business and what exactly you want. However, for the purpose of this article, I would like to share some basic starting points which will help you to achieve macro-level excellence. This will give you more clarity and enable you to strengthen your brand presence as well as appeal to all stakeholders.
S.P.O.D stands for specific point of destination. If you want to reach a certain destination, you need to have a clear plan and road map in place. You will also need to have the right tools and equipment aiding you in reaching your S.P.O.D. If you want to scale up your business, start with being completely clear about what you wish to achieve. You must ensure you have your timelines, revenues, the additional number of staff, equipment, and any other requirements in as much granular detail as possible. Once you have your S.P.O.D well-articulated, you are off the races.
Your S.P.O.D must be linked to your overarching vision. This will enable you to connect the dots. So why is this important? The choices and decisions you make will directly or indirectly impact your S.P.OD. and vision. Having an alignment will help you to be congruent and enable you to make the right decisions. Have a compelling vision that is clear and simple enough for all stakeholders to grasp the true north of your business with ease.
Diversity and Inclusion
This is extremely critical in ensuring family businesses have a sustainable model. If you note, large-scale businesses in many countries are required to have diversity and Inclusion as a key governance practice. Now, this is where you may need a budget. I consider this as an investment. You need to ensure you have the right team on board. Having diverse views and insights which are relevant to your business will drive growth. With the global landscape changing at an ever-faster pace, you need to have best in class team to support you in accomplishing the milestones. There must be some set guidelines and preferably a competent board coach who can assist in the process.
In order to ensure you have all the board-level discussions in place, you will need to have a plan in place. Having a system-based approach ensuring that there is clarity and accountability at the top is critical. In order to achieve the desired results, family businesses must have policies outlining the core purpose of the business and how the business is going to achieve. This will help the business have a blueprint of the discussions and guidelines required to take the business to the next level.
Training and Development
Skills and capabilities are needed for the board to function at the highest level of excellence. A training program which we have Achieving Boardroom Excellence or similar will enable board members to be up to date with all the governing practices to help your business scale up. Always look for a program that has some credence ensuring that you have the right and relevant training to sharpen governance and board skills for your senior team.
The above are simply some of the core components that will help you raise your standards and help your business build a brand. More importantly, you will have a leadership pipeline with the right and relevant training ensuring your business achieves the success it deserves.
In summary, governance starts from within. Having an inner alignment with pure intentions eliminating conflicts of interest will help you eliminate the roadblocks you face at present.
Learn more about our cutting-edge program Achieving Boardroom Excellence which aims to help you become a highly effective business owner, director, and executive.