Editor's Note: Take a look at our featured best practice, Family Business Toolkit (196-slide PowerPoint presentation). Introducing the Complete Family Business Toolkit: Unlocking Success for Your Family Enterprise In today's dynamic business landscape, family businesses play a significant role in driving economies and creating lasting legacies. However, navigating the complexities of running a family business [read more]
Professionalizing the Family Business: Getting Ready
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Every firm will eventually reach the point when it has to professionalize the way it operates. This is done by instituting more rigorous processes, establishing clear governance, and recruiting skills from outside. Family Business is no different.
In the Family Business Survey, 43% of the companies believe that the need to professionalize the business is a key priority over the next 5 years. But the family firm has another dimension which other companies have to tackle: the family itself.
The issues in Family Business are much harder to address. They are more personal, more complex, and the risks if it goes wrong are potentially terminal. Many times, family firms fail for family reasons. It is no surprise then that the progress of Family Business when it comes to professionalization is slower.
Contextualizing Professionalization: What is a Professional Company?
Professionalization is more than a mere change in family management. A company is regarded as a professional when it has a high internal standard of performance and ethics which the company strives to achieve. A company is said to be professional when it has a culture that emphasizes on performance, consistency in rewards, adherence to the core values of the company, strives for fairness, and treats people like adults.
A Family Business can be a professional when family owners are good stewards and a high level of performance is encouraged. This can be achieved when the Family Business adheres to the 6 Pillars of Professionalization which can lead Family Businesses to be professionally managed.
The 6 Pillars of Professionalization
The first pillar is Attract, develop, and retain great family and non-family talent. The best position is for a family that produces a business leader with enough skills, good values, and has the ability to keep shareholders, employees, key customers, suppliers, and other loyal family leaders. A family must be realistic about its talents and passions to make rational decisions as to who will manage and lead the business.
The second pillar is Ensure that the organization can always make a timely big decision. The best position would be when the business makes timely decisions about capital expenditures, organization changes, hiring of key managers or its strategy to succeed. Taking timely big decisions is essential in business more so when the business environment is very volatile.
The third pillar is Strengthen family discipline and commitment towards the business. There should be enough family discipline to act responsibly towards the business and adequate dialogue about important family business concerns. Family commitment to the business is of strategic importance.
The fourth pillar is Respect the management hierarchy and empower employees to make decisions. Family members must respect the hierarchy of the business and must involve non-family managers in decisions. The congestion of decision making at the top of the organization generates passivity, slows progress, and stifles creativity.
The fifth pillar is Create systems to ensure consistently high performance and fairness. There is professionalism when family management is systematic within its Performance Management practices. We need to understand that systems are the fundamental driver of professionalism.
The sixth pillar is Guard your core values like a hawk. Employees must embody the core values of the business and the basic ethical standards of honesty, respect and fairness. The ethical dimension of professionalization is as important as the performance dimension.
The process Family Business Professionalization is one with a lot of challenges. Each pillar has its own challenges, as well as strategies to take to effectively put these pillars in place. Understanding these challenges and strategies provides companies the best direction to undertake the 5 Pillars of Professionalism.
Interested in gaining more understanding of the 6 Pillars of Family Business Professionalization? You can learn more and download an editable PowerPoint about 6 Pillars of Professionalization here on the Flevy documents marketplace.
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