30 Years, 3 Lessons

As we celebrate our 30th year and move into our 31st, we reflect on three key lessons of our work and offer these to the many families in our network with our best wishes for the coming years.

 

Family businesses don’t succeed over generations by accident. They require great discipline, persistence and agility to remain successful, especially in today’s fast moving, disruptive world.

For the last 30 years, we at the Cambridge Family Enterprise Group (CFEG) have accompanied family businesses from more than 70 countries as they navigate economic cycles, industry disruption, family challenges, and transitions of various kinds. Our consistent goal has been to help families and their enterprises find their most promising paths to longevity.

Our consistent goal has been to help families and their enterprises
find their most promising paths to longevity.

On our journey, we have engaged with hundreds of families in business who strive to overcome challenges and reach their goals. We have supported and learned from family businesses ranging from the founder stage to the 17th generation. Through our advisory engagements, research, and education programs, we built explanations for why some family companies endure while others fail, why some families stay united while others fragment, why some families regenerate their wealth and success over time while others lose theirs. These understandings, in turn, have strengthened our ability to help families and their enterprises thrive.

As we celebrate our 30th year and move into our 31st, we reflect on three key lessons of our work and offer these to the many families in our network with our best wishes for the coming years.

LESSON 1: Define your total Family Enterprise.

The core business of most enterprising families receives most of the family’s attention. This is to be expected since the business typically generates most of the financial returns, opportunities, and visibility enjoyed by the family. But the family has other assets and activities that extend the family’s reach and build the family’s unity and reputation. (See The Family Enterprise figure below.)

An enterprising family often has non-core business activities (like real estate assets or startup ventures), financial assets, family assets (like homes and art), and perhaps a family office. The family is involved in community activities and philanthropic activities (like religious or social organizations, or schools and causes they support). Family members generally spend considerable time and effort educating and developing the next generation and trying to create a satisfying family life. The point is that the family business, while a centerpiece of family life, is not the only important asset or activity of the family. In fact, we have found that keeping your family united, productive, and collaborating requires having a vibrant family enterprise that extends beyond the family business.

The Family Enterprise exercise unites the family in powerful ways.

Families should map their family enterprise and become aware of the important activities and interests – beyond their core business – that help families achieve their goals. These deserve attention, resources, and planning. A family enterprise also requires multiple talents to make it run and a number of family members to contribute their time and skills. Giving multiple family members the opportunity to participate in meaningful initiatives of the family helps build a sense of belonging for family members and commitment to the family and its enterprise.

In addition to engaging the family, this exercise provides an opportunity to plan for the future. Families use the family enterprise model to envision where they want their enterprise to be in another decade or generation. When they are better able to visualize their total future enterprise, they can allocate the right resources to get there, and align their vision, priorities, and resources. This exercise unites the family in powerful ways.

LESSON 2 – Be intentional about your family’s purpose.

In the early years of a family business, family life typically orbits around the business, nurturing the business with the devotion that a parent gives to a young child. But as generations pass, it is natural for family members to pursue diverse activities; many will move away from the original home base and not be as connected to the business, and some may question the benefits of their partnership and whether they should remain as owners.

With increasingly diverse interests and circumstances, what can hold a family together to not only support its business but also other activities the family finds important? Our experience shows that even a large, diverse family can stay united if its members feel they strongly share a common purpose. Other factors besides a strong family purpose, of course, help encourage family unity, but purpose is a fundamental ingredient in maintaining unity.

Even a large, diverse family can stay united if its members feel they
strongly share a common purpose.

A business family’s purpose should include – but also go beyond – their business. Raising capable family members, having close relationships, building value in the world, solving significant problems, giving back to their community, country, or region, enjoying the fruits of life are also desired goals of most families we work with. The questions families need to ask when exploring their purpose is “Why are we in this together? Are we in pursuit of the same things, in the same way?” It is difficult for a family to organize and motivate itself to continue to grow the family enterprise over generations without agreement on why it matters.

A family mission or purpose is not a theoretical tool. Families use their sense of purpose pragmatically to make important decisions about their enterprise and family. Millennial family members reference the family mission when deciding whether to join the family enterprise, to ensure compatibility with their own personal mission. Families cross-reference the family mission when recruiting non-family CEO candidates to ensure a cultural fit. Family offices use it to narrow down investment options. Family foundations reference it to guide funding decisions. Family Councils use it to invigorate themselves and keep the Council focused on achieving what the family has set out to do. The family mission is a key lever for increasing alignment among the business, family office, investments, stakeholders, and the family and owners.

LESSON 3 – Long-term family success is a team sport.

Threats to a family enterprise come in various forms. The Ferragamo family endured the early death of their iconic founder, Salvatore. The Vanderbilts lavishly exhausted their fortune. The Haub family endured war and lost virtually everything. Family conflict divided the Haft family and bankrupted their business. The Daher family was disrupted in their industry and the value of their company plummeted. Lego overly diversified into businesses they knew little about and lost substantial value. In today’s world, disruption will likely impact every business sector and every family business.

It turns out that resilience is a set of capabilities that families can learn.

Adversity and crisis reveal the resilience of a family. Some families derail, divide, and destroy value in the face of adversity. Other families unite, pivot, and create value. What sets the resilient families apart? A repository of non-financial assets developed well before a crisis, including: genuine interpersonal trust and respect, collaboration, an overriding family purpose (mission), jointly-held values, a spirit of generosity to help one another, a belief that adversity does not predict the future (that they can rebuild and flourish again), and a good leader helps.

It turns out that resilience is a set of capabilities that families can learn.

Families and ownership groups that address challenges together, and invest sufficient time and resources into building unity and teamwork are better able to pivot and rebound as the environment calls for it. The Ferragamo founder’s widow, Wanda, rose to lead the business, which grew many-fold. The Haub family rebuilt their businesses after WWII into one of Germany’s leading companies. The Daher family reinvented their business and have succeeded. Lego regained their focus and became the most profitable toy company again. None of these rebounds would be possible without good leaders, unity in the family about what they are trying to do together, and the trust, respect, collaboration, and generosity that kept family relationships strong.

The families who learn these skills together, and value being part of a team, are better prepared to take advantage of opportunities and bounce back from difficult times.