Think you can just take over your family’s empire? Not just yet. Even the heir of the world’s oldest tennis-making company Babolat had a shaky start walking into his father’s role when the latter was struck by tragedy.
Experts say those who intend to step into their ancestors’ legacy need to prepare themselves well in advance to tackle the complex role of running a family business.
It is no secret, Kiwis business owners have the “she’ll be right” attitude when it comes to even the most fundamental business rule of ensuring the business is passed onto good hands.
Published report show that 20 per cent of businesses in NZ would fold over if the leader/owner was hit by illness or death while about 30 percent could carry on for a few more months before having to close.
But how can you tell if you are suited to take on the family business?
Denise Kenyon-Rouvinez and Anne-Catrin Glemser from The Wild Group Professor of Family Business at Swiss business school IMD identified some challenges faced by someone being thrown into the deep end of the family business and provide some hints on how to navigate this tricky business.
Unexpected and tragic events happen even to the best of businesses. Take the case of Eric Babolat who is a fifth generation Babolat, the oldest tennis making company in the world.
Despite joining the company early to learn the ropes of the business, he was ill-prepared for the leadership role thrust upon him after his CEO father Pierre was killed in an airplane crash while on a trip home after the US Open tennis tournament.
“We all were totally caught by surprise,” Eric was quoted saying, adding that his sister and he had to instantly take over the responsibility for the business and on top of it manage ownership and governance issues.
Eric wished he had properly learnt the ropes. Babolat needed leadership to help it grow its first line of tennis racquets in Europe, and to expand its US market.
While Eric and his sister had learnt bits of the business, they were not fully inducted into what it means to “stand in” and take over as business owner and continue the dynasty, according to the IMD report.
The IMD provided a list of key questions that next-generation members should ask themselves before joining the family firm.
- Do I want to join my family business?
- What role should I play?
- When should I get involved?
- What does it take to succeed in a family business?
Not everybody knows if they want to own and lead a family business. Some younger generation prefer not to take on such a huge responsibility.
Parents might not openly discuss the question of the next generation joining the family business, because they don’t want to put pressure on them. But children can intuitively sense their parents’ expectations, the report adds.
Next-generation members need to not only develop their executive leadership skills but also have a fine sense of “family acumen” to manage their relations inside the family system. And while ambitious family members may aim to become the CEO or board chairman of the family firm, but only a few are up to the task.
“In between these two extremes are many possible paths, such as the family strategy committee, family to business advisory board, family assembly, next-generation committee, head of human resources, family council, social responsibility and sustainability committees, family investment committee, entrepreneurial fund and non-core projects, family office, overseer of the family mansion and archives, family foundation and philanthropy, head of an “information circle” and “study groups” to educate next-generation owners, social events chair, and leader of a “memory project” to record the history of the family firm and individual contributions to it,” the authors say.
What makes it hard is there is no real “best timing” for taking on the family business. It depends on, and evolves with, the individual’s life stages and personal development. What counts is the commitment and initiative to strengthening the family glue.
Those who step right into the family business right after school need to be patient because decision-making power will not be granted to them immediately.
“Family businesses have become very professional and often expect family members to outperform their non-family colleagues to demonstrate their ability to step into their predecessors’ shoes,” the authors say.
Before taking on the family business, it helps to experience the corporate world, and gain insights on leadership, ownership responsibility, governance, and financial skills.
“Besides these “hard skills,” young potential leaders in family businesses should also learn about what it takes to lead a family – the pitfalls and the tools that might help a family to structure itself and take the business to the next level.
“Understanding family communications and one’s own role in a team of family members helps to separate individual from team dynamics and enables the next-generation member to become a responsible family shareholder.
“What cannot be taught in a pressure cooker is the commitment to the concept of stewardship and a particular family’s principles. Teaching their juniors a solid and sustainable set of values and beliefs and providing opportunities to realize them is ultimately part of the parents’ job,” the authors say.