Unlocking Family Business Sustainability: Four Steps to Future-Ready Succession
Sustainability is key to survival and success in multigenerational families, particularly when transitioning from one generation to the next. However, many businesses do not know how to describe and understand what sustainability actually looks like for their organisation and how the value of sustainability can be used to engender the productive discussions that will lead to successful intergenerational transition.
Many family members do not understand their role in the business, or know the inner workings of the company. They do however know the extent and nature of their emotional connection with it. By adopting a simple four step process, businesses can develop a common understanding through a framework for conversations between generations. The process helps family businesses understand the entrepreneurial spirit shaping their business across generations and the activities that add to such entrepreneurial orientation. The next generation can also better understand their role in shaping the future of the business, and balance their own needs with those of the wider family and the business.
There are three key emotional factors that can influence the next generation in terms of whether or not to join the family business.
- A perceived duty to the family, making them feel obliged to join the business.
- The desire for leadership, wanting to contribute to the family business and actively choosing to join it.
- Effective identity factor, linked to what is actually at stake within the family business and on a global scale.
Step 1: Sketch a genogram
The first step is to sketch a pictorial representation of not only the family tree over multiple generations, but also the familial and emotional relationships between the members in the family tree – in terms of emotional closeness, level of personal conflicts, friendship status, and strength of relationships. Men can be represented as squares, and women as circles, for ease of visibility. The genogram is a powerful tool that is used by psychotherapists to delve deeply into family dynamics, and in the context of the family business it is useful for a higher-level understanding of family relationships. To get you started, you can find a variety of symbols and examples here.
Step 2: Visually diagram your family business
The second step is to visually represent the family business in two time periods, now and in 20 years time, in the form of a pair of freehand diagrams. The ‘future business’ representation shows what emotion is projected onto the drawing of the ‘current business’. One of the most interesting elements that emerges from this step is that the likely impact of climate change and environmental issues over time are evident in the ‘future business’ representation. This implies that the current generation sees climate change as a key driver for the sustainability of the company, despite not necessarily expressing a concern for the environment as one of the company’s key values at the outset of the process.
Typically, the ‘future business’ diagram is lighter and more positive from a visual perspective, portraying the positivity of the next generation coming into the business. Climate change can clearly be seen as a locus of emotional ownership and can be a catalyst for younger generations breaking with the family business if it is not addressed: a failure to take into account the environment within a 20 year period impacts the emotional ownership and has potential for ruptures within the family itself.
This learning alone provides a useful talking point for families when discussing the sustainability of the business and the level of involvement of the next generation. Additionally, the future version of the business typically shows a move away from a diagram demonstrating order, direction, goals and planning to a more freeform diagram showing creativity, innovation and empathy, with the entrepreneurial orientation of the next generation being a key call to creativity in the face of the environmental crisis.
Step 3: Create an avatar
Next step is to “invent a character” personifying two versions of the business, now and in 20 years time, as two imaginary people in your family. They cannot be based upon anyone already known, but must be entirely new people. Each of these two ‘people’, now effectively a single entity, should be superimposed upon the family genogram developed in step one and connected to the rest of the family using the same genogram principles. While every organisation will have its own version of this enhanced genogram, experts have seen three key factors that have emerged from the majority of organisations.
- The ‘current business’ was predominantly inserted as a male character into the family, whereas the family member inserted as the ‘future business’ was typically female
- The ‘current business’ character was typically older than the ‘future business’ character
- The ‘future business’ character typically had stronger relationships with other people in the family than the ‘current business’ character
It is clear that family businesses need to evolve to bring the younger generation with them, and the steps above highlight the disparities between generations. This disparity is however a context for conversation, and provides a starting point for the fourth step of the coaching process.
Step 4: Discuss family dynamics
As a family business, compare and assess the different versions of the current and future business personas and family genograms. A forum can be established to communicate together as a family business. It is useful to communicate together at the lower levels of the organisation, where relationship dynamics are often less complex and conflicts can be less entrenched. A family charter can be established around the younger generation, sharing thoughts and insights upon how the family business can evolve, particularly in a context of environmental concerns, and remain sustainable. These conversations can help the younger generation to be involved, not because they feel duty bound but because they feel they can genuinely contribute to a family organisation that values their beliefs. The conversational activities can then be expanded throughout the family business, bringing in more generations, with a united front from the younger generation focused on positive change rather than conflict.
A family business combines both the worst and best of family dynamics while running a business. This process can help unite the younger and older generations of the business by giving them common ground to exchange and a framework in which to develop a roadmap for the future of the organisation. Bridging the intergenerational gap through structured conversation will help family businesses achieve success and sustainability.
If you’d like to work with a Trusted Family expert on this process, please reach out for a commitment-free conversation here.