Creating a long-lived family business
Listen to Dr. Joseph Astrachan, who teaches family business at Kennesaw State University explain how the strength of a family business comes from the family working together to achieve a common goal. Creating a common goal among family members helps ensure long-term success when transferring the business to the rising generation.
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A family business is a strange mix, a curious mix, of communalism and meritocracy and capitalism. I think that it is a mistake to raise children to think that being an individualistic leader is what is important for a family business.
A CEO’s success is in large part defined by the degree to which they take managing the family as one of their fundamental tasks. If they make the family their business, the family succeeds and the business succeeds. The CEOs that tend to have the worst experience and last the shortest amount of time are the ones who say, “If the family would just leave me alone, I would make them a ton of money.” Those guys fail at a much higher rate.
The strength of a family business is when the family members all work together in order to achieve a ... View More common goal, when they put aside their own differences and their own needs to achieve something greater. There is a family in Georgia that has now developed a national and occasionally international chain of restaurants. They are in their third generation, the fourth generation is alive and the first generation is still alive. Their version of leadership is mission-driven steward leadership, that is, “We are here for something much bigger than profit; we are here for the benefit of humanity.” When they do that they bring the family together in a way where personal gain is not part of their vocabulary. Their reason for existing is to support the family, to support the communities they are in and to support their operators or the people who run the restaurants. And it is a tremendous success story.
We are now beginning to see research that is suggesting that there are multiple dimensions of success and family businesses have idiosyncratic goals. That is their goals are not public company goals. Their goals might be reforesting a whole area of Japan. Their goals might be keeping the family healthy for decades to come. Their goals might be survival of the business for hundreds of years. Now if you are truly going to do a performance study, and this is where we are going in the research area, you would say, “How are families performing against the goals that they have set for themselves?” Not how do they perform relative to some goal that all business should have. And even the idea that all business should maximize profits is not founded in terms of its relationship to survivability of businesses.
If you want your family to be a multi-century family, you will adapt dynastic family business culture. And that culture involves open communication. It involves being able to cross generational boundaries. It involves putting the family before the individual.
One of my favorite movie clips, which is from the 1930’s, it was called The House of Rothschild, and in it there is a scene where the progenitor of the Rothschild bank is talking to his sons. And he gives them one big piece of advice, which is “I want you to promise me, not one of you shall succeed if it means that others will fail.”
Raising your children for an ownership point of view which is we are here to help this thing that we own together become better than it was when we first had control over it is one of the key ingredients to the success of a business and the success of a long-lived family.
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