Are you a thriving family business? Are you a part of a large group of family enterprises that never get to see their third generation? Would you want to know where you are in the evolution of a family enterprise?
According to John L. Ward in his book Perpetuating the Family Business: 50 Lessons Learned from Long-Lasting Successful Families in Business(Palgrave-MacMillan:2004) there are three common and distinct phases of family business: Stage I is the Owner-Managed Business phase, Stage II is the Sibling Partnership phase, and Stage III is the Cousin Collaboration phase.
Ward in his book talked about how it is in families and what lessons can be learned. I'm more biased towards talking about what lessons we can learn rather than the messy part of what families and family businesses are.
So in the perspective of learning lessons from successful family enterprises, here are the three distinct phases of the family business and the lessons we can learn from each of them:
Stage I - The Owner-Managed Business
In this stage of a thriving family business, the founder is the proprietor with the business founded and managed to serve the pleasure of the founding owner and his or her immediate family.
The founder as a capitalist sees his goal as generally to maximize the shareholder value of the business even if it means selling the business to get the results.
The founder as a steward will preserve and/or enhance the business for the next generations.
Stage II - The Sibling Partnership
In a successful sibling partnerships, siblings see themselves in three roles: as co-managing partners, as caretakers, and as investor-partners.
In a successful family business, siblings share ownership value, power, and managerial responsibility in equal depth and proportion as co-managing partners.
As caretakers, a sibling with ownership control either as a trustee or a shareholder with the most voting power (golden share) takes personal responsibility for the performance of the business and the welfare of the family, while the other siblings participate equally in both management and rewards of ownership.
In investment partnership, the siblings not employed but are investors in the enterprise with a non-family trustee or non-family professional executive taking responsibility for leadership in the enterprise.
Stage III - The Cousin Collaboration
Cousins working together in a successful family enterprise do so in the different ways.
As a family holding company, cousins or family members govern the enterprise collectively for the welfare or benefit of the whole family.
As an entrepreneurial venture fund, family members are encouraged to venture into other business using the collective family funds and sharing the success in part for the family and in another part as a fund for future use in individual ventures of family members.
A successful family enterprise may choose to run the company like a publicly traded enterprise where family members can hold or divest their individual shares as they wish. Decision-making and governance are made similar to a non-family controlled and publicly traded company.
Just because we can easily describe each stage of the phases of a thriving family enterprise does not mean it is easy to get from one phase to another. Statistically, very few family enterprises get to survive Stage II.
Thank you: Evaluation against the masters' level criteria:
Descriptive - The post is primarily descriptive, providing a breakdown of the different stages of a thriving family business.
Myopic - The post is not myopic as it considers different stages of a family business.
Normative - The post is somewhat normative in that it suggests that a successful family business should strive to reach Stage III.
Analytical - The post is somewhat analytical, as it breaks down the different roles and responsibilities of family members at each stage.
Synthesis - The post is not very synthetic as it does not integrate multiple sources or perspectives.
Value-adding - The post provides value by offering a framework for understanding the different stages of a successful family business.
Areas of concern:
The post lacks specific real-world examples or evidence to support its claims about the different stages of a successful family business. Additionally, there are no citations provided to support the assertions made in the post.