Shared values, well-established boundaries, clear communication, and professional competence are the keys to survival for family enterprises.
That according to David Bork, a family business consultant with nearly five decades of experience and over 400 successful interventions in the field, who discussed what will save and what will ruin a family enterprise at the 2nd Family Business Conference at IESE’s Barcelona campus.
The conference featured a variety of speakers on the intrinsic challenges of family enterprises and the hurdles they are facing in a rapidly changing world.
The fate of family enterprises is not a minor economic issue. In most countries, family businesses account for 70% to 95% of all businesses, according to the EU federation European Family Businesses. However, their management, ownership and family composition make for a complex animal.
Alignment was the first of four secrets Bork identified in the foundation of his counseling strategy. What does this mean exactly? “Shared values are the number one thing that will keep a family business strong,” Bork said.
“You need to talk through the rough stuff to have a clear strategy. This doesn’t mean you have to think the exact same way though,” Bork said. He stressed the importance of striving for the same goals for the company and having an attitude of pitching in.
“If there is something to be done and it’s in front of you, just do it. Don’t walk around it. Having the right attitude is necessary.”
“Boundaries are also extremely important because if they aren’t in place, you will end up in trouble,” Bork said. Boundaries determine how the family will interface with the business.
“Failure to define the interface between family and business is at the root of many family business problems. Family members must not meddle in areas that they don’t have responsibility in,” he advised.
“Effective communication starts by being clear and constructive. Why should anyone wish to be unclear and deconstructive?” he mused.
Bork highlighted the importance of respect within a company and avoiding talking-down to family members or non-related colleagues. “In a family, there ought to be heart-to-heart communication. And if there isn’t, then ask yourself the question ‘Why isn’t there?’”
Professional competence is the fourth pillar of Bork’s recommendations. “No business will be successful if the leader is not competent and there is no correlation between the family gene pool and competence,” he stated.
Moreover, “If you’re really smart, you can pretend to be dumb. But if you’re really dumb, you can’t fake it,” he joked. “The ability to sustain high-level performance over time is the best evidence of competence.”
And hiring an incompetent family member will backfire for the individual as well as for the company. “If you employ a family member who is less than competent, they won’t be able to perform at an acceptable level. So they won’t receive pats on the back; they won’t be asked for input; and they will be pushed to the side and you will have an unhappy employee,” he said.
“What a mess! Who is responsible for it? Who will clean it up? It is probably better not to make this mess in the first place.”