The real challenge for family businesses in todays market, is to remain competitive without compromising organisations value systems. Most of the family firms are value driven companies and unlike their corporate competitors, the business decisions are not fully based on bottom line results. This is the reason most of the family business owners are not ready to take outside financial support.
The family businesses who are reluctant to take outside finance (when needed) to grow the business, can protect the “values” but remain local/small, and always live in past glory and hardship of the founders.
The decision of keeping the business small and independent of external finance is taken most of the time emotionally and not strategically. With this approach of keeping the business small comes the BIG challenge of attracting and retaining next generation family members, who have studied abroad, worked with MNC’s for experience and want to grow their family business with new approach.
The ideological mismatch or say GAP in generations affects the business as, many times they don’t plan the strategy based on market conditions Vs competitive advantage of their family firms.
Keeping this in mind the next generation should consider following approach towards business in their family firms to stay successful and achieve sustainable growth:
- Either the business should operate in niche market for high profitability or must stay low cost to attract volume business, before taking any decision, align your business approach to the mission and value of the family firm which has kept non-family employees & family members together and motivated for years. The biggest wealth in family firms is the years of experience and the knowledge.
- Growing fast needs lot of resources, which will demand financial support as well as taking calculative risks. Understand your family members mind set, traditionally their priorities will be growth is secondary, primarily financial independence. Almost all Family business owners and elder generation team are progressive and understands business opportunities well. As a next generation representative, Create a family Business Board. This platform will help you to present your ideas more structurally at the same time getting it validated more positively than sarcastically. Business families are willing to invest their own funds provided the approach is conservative and the approach towards growth is organic.
- While presenting a business plan or new approach,it should not be presented as correct prediction of what is going to happen as exactly mentioned in the plan. Many times there will be change in results and that needs to be presented and addressed based on the merits. When the role of elder generation becomes fund provider at times they become more critical out of fear of loss in business. In case of inactive family members , whose income depends upon the growth and dividends of the Family business, it becomes very important to take them in confidence. End of the day market decides the course of business. So if the course correction is needed, it should with the family board agreement. This should not sound “your” project.
- The most challenging part in family firm is the culture, which can be a double edged sword. It can become reason for growth as well as stagnancy. Managing people is the most difficult challenge in family firms at the time of introducing new generation leaders to business. This must be well planned and done with lot of proactive steps considering the culture and people related dynamics. While you as a young leader taking charge should not make the team insecure or over powered.
As a next generation leader, you must FIRST develop required skills & knowledge as an individual, SECOND gradually upgrade your role in the business, (the older generation and core employees will accept you positively) and FINALLY help your mission of growing the family business.
By Chandrashekhar Bhat