The article “Leadership Lessons from
Great Family Businesses” published in the Harvard Business Review provides
several practical suggestions for increasing the chances of a successful CEO
transition process for family enterprises.
By analyzing 50 globally leading family
firms with annual revenue above 500 million pounds and investigating the
reasons behind their success, authors Fernández-Aráoz, Iqbal and Ritter explain
that strong governance; a family focus; an openness to family and non-family
members; and a structured, methodical approach to the succession process significantly
affects the overall chance of success in the process of generational
transition.
The authors describe these factors as
follows:
·
a governance baseline
·
“family gravity” (a family
member as the center of influence)
·
future leaders with aligned
values
·
a disciplined CEO succession
plan
Firstly, the
authors identify governance as the baseline from which to attract and manage
both internal and external talent. They found that nonfamily executives had
concerns related to governance before joining a family firm because of the
likelihood that the family would influence the business as oppose d to being
professionally-run. Pointing out that very few companies in their study
operated without eith er a supervisory or advisory board, and in many cases where
there was a board, a “clear separation” between family and business
representation existed.
Secondly, the
authors use the term “family gravity” to describe a family-centeredness or
unique family focus which includes at least one family member, an d as many as
three, as a center of influence which personifies the corporate identity,
aligns various interests and maintains a common vision. (This term is sometimes
also called “familiness” in other context s.)
Thirdly, the authors identify the skill
and rigorousness with which the family seeks and finds future leaders as
another key factor in the success of generational transition, and argue that
both family an d nonfamily talent must be assessed on competencies, potential
and values, with a particular emphasis on values. In the study, company ethos
was often described by both family members and nonfamily executives as
respect, integrity, quality, humility , passion, modesty and ambition. Along
with
cultural fit and investment in talent development, these values provide a
solid foundation from which to start.
Lastly, the authors outline a disciplined
succession process with which to approach multiple candidates for a CEO
appointment proactively and strategically, and display it in a clear and easily
understandable three-phase table. Based on the experiences of the best family
businesses from their sample, they found that many of the companies followed a
hierarchical process when considering candidates, and gave first preference to
family, then internal talent, and then finally external executives. While the
authors have identified three “nonfamily CEO archetypes,” many experts could
argue that it isn’t necessarily accurate to classify “types” in this way,
particularly in family enterprise, where firm-specific qualities vary from company
to company. However the recommendation is sound, with the contextual knowledge
that the archetypes describe leadership qualities which would be most effective
in family enterprise environments overall.
Ultimately, the authors have identified
governance; a family focus; leadership values and discipline throughout the CEO
succession process as crucially important factors which will positively affect
the success of intergenerational transition in otherwise successful family
firms. Given that succession is a profoundly complex and challenging process
for most , if not all, family firms, these recommendations derived from
research on some of the most highly successful enterprising family businesses
globally should be taken into consideration.
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