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Executing a Generational Business Mindset

✦ Businesses run by families that have lasted generations are always thinking long-term. The family-leaders of these businesses put generational survival over short-term success and immediate personal returns.

Shepherding the business toward long-term viability is the main concern, which tends to make these businesses less profitable than non-family-owned organisations in boom times and more resilient in down economic times.

Family businesses focus on resilience more than performance. They forgo the excess returns available during good times in order to increase their odds of survival during bad times. They save for a rainy day.

A Family Business is a Labour of Love | Brilliant Online

Leaders of family businesses often invest with a 10- or 20-year vision, they concentrate on what they can do now to benefit the next generation, with the goal of their family business and legacy to continue on.

Family businesses have a resilience approach

Most family-run businesses are financially conservative in both good times and tough times, they tend to invest in capital projects that they can afford and that are more likely to produce stronger returns for the business.

Establishing processes, committing to ongoing succession planning, protecting a brand’s “mom-and-pop” identity, and remaining resilient are four characteristics of family-run business long-term success.

In his article “What Can All Businesses Learn from Family Businesses”, Forbes writer Dennis Jaffe arguably captured the family-run business mystique best when he wrote: “As such, family ownership differs from unrelated owners focused primarily on maximising present profit. The difference lies in the present generation of owners’ connection to the past and the future. A member of the Hermes family perhaps put it best: ‘You don’t inherit a family business; you borrow it from your grandchildren.’

Characteristics of generational family businesses

Family businesses play a critical role in the global economy, with some of the world’s most successful businesses having been passed down through families from generation to generation.

Only 12% of family businesses survive into the third generation and a mere 3% make it to the fourth, according to the Family Business Institute.

Your family business might be in its infancy, deep into its first generation, or perhaps it is one of the 30% that remain active into its second generation. Regardless, as time goes on, the likelihood that the family business you’ve worked so hard to build and maintain will continue diminishes significantly.

A surprising 80% of the companies in the world are family-run; in the U.S., family businesses employ 60% of the workers and generate 78% of new jobs. (Source: Harvard Business Review.) A good number of these businesses are large and successful, and a handful have lasted for hundreds and hundreds of years.

Establish Processes Over Time

Family-led organisations that survive for five years, a decade, or more all reach a tipping point eventually where processes must be established and implemented. Most family businesses that thrive and succeed across generations are good at balancing the intimacy characteristic of a family-run organisation with standard business operating procedures and processes.

To grow, family businesses need capable staff from outside the family; the business needs to ensure there is a fair, repeatable process and fair policies in place to attract and retain the staff required for the businesses success.

A family business cannot have long-term success if it is solely guided by the whims and moods of the matriarch, patriarch, or next generation leader.

Leveraging the Family Brand

Family businesses that have succeeded across generations know how to leverage the family-run brand to their advantage. Family-run or family-owned and -operated businesses - even just family member-led organisations - tend to be trusted more by customers, clients and consumers.

Family-run businesses tend to start from a position of strength when it comes to audience perception of their brand, benefiting to some degree from a long-standing affinity for the tradition of “mom-and-pop” authenticity and honesty.

Family businesses that have survived across generations understand that this “mom-and-pop” trust is a valuable differentiator and they invest in the process and infrastructure to preserve it.


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