How Family Businesses Can Build – and Maintain – Success through Transformation
From the outside, multi-generation family businesses often appear to be models of stability. Yet underneath the durable exterior structure, many such companies must deal with highly complex family politics and emotional components that affect how they operate and how they are led. Lack of cohesion and strategy during crucial processes – like business transformation and succession – causes the vast majority of family businesses to fail before they reach the third generation.
The implications for such failures are reach far and wide, as Thailand’s economy relies heavily on the success of its family firms. Furthermore, today’s fast-moving commercial landscape leaves very little room for error or delay, as long-successfully business models are supplanted year after year by companies that put forward more technologically savvy alternatives.
Given the business world’s embrace of shifting norms and digital disruption, family-run businesses must work even harder to meet the special challenges of this new economic landscape. A new emphasis on far-sighted strategy and preparedness is currently needed – beginning with improvements to organisational structure as well as a clear view of the road ahead. The businesses need to move from being internally focused to be customer centric. These changes will need a new strategic plan and operating model to drive the successes of their organizations.
Business Transformation for Tomorrow’s Economy
Founders of an organisation are often heavily invested, both emotionally and financially, in the companies they start. This personal investment can be a huge source of strength for a company, but it can also create tension when younger generations take over its day-to-day operations. The transition to the next generation needs to be properly planned and executed with a clear roadmap.
Business cultures have the potential to change rapidly, and when the younger generations seek to diversify, expand and transform the organisation, they may be met with resistance from founders who are unwilling to let go of the reins of power. The lack of trust between the generations is a barrier to take the business forward.
Family businesses must find effective ways to transform themselves in order to ensure their long-term success. Digital disruption will inexorably change the business models of all organisations, both large and small. Family businesses in particular need to prepare and plan for this inevitability, or risk lagging behind their competitors.
Outside professional assistance can help families adapt their businesses to the changing needs of consumers in today’s dynamic economy. By generating a renewed focus on innovation and digitalisation, this far-sighted approach can allow the next generation to lead the company forward into the new age. Far from driving a wedge between the generations, unbiased professionals can provide fresh perspectives and insights to bridge the gaps between generations, leading to better overall cooperation and cohesion.
Consistency Depends on Succession
The succession process is a perilous time for any family business. If the wrong successor is chosen, generations of work can be undone within months. On the other hand, if the successor is well-respected by both family and auxiliary staff alike, and is properly equipped to lead future transformation, the business can go from strength to strength, remaining viable for generations.
Ideally, succession will be decided upon clearly, swiftly, and decisively, so as to create no room for familial conflict. Moreover, the earlier a successor is chosen, the more time becomes available to train the future leader for the many responsibilities they will need to face in their position.
Family constitutions can a be great source of clarity during the passing of the leadership baton, particularly in parts of the world where traditional values can potentially conflict with best practices. A well-written family constitution eliminates variables and smooths the course of succession, often defusing conflict before it begins. When drafting a family constitution, enlisting the help of disinterested professionals can ensure a more cogent document that properly considers the desires of all parties involved.
The Owner’s Room Methodology
Family business leaders need to provide all stakeholders – both inside and outside the family – with a clear plan for the future. But managing the day-to-day operations of a business can make it difficult for leaders to find time to contemplate the future of the company.
An Owner’s Room session provides an excellent way to overcome this type of planning challenge. The Owner’s Room guides a thought-provoking conversation and analysis of four core areas: the ownership journey so far, the state of the business today, the goals for the future, and the importance of clarity for stakeholders.
The methodology used in the Owner’s Room can be particularly beneficial for family business leaders, as it offers invaluable insights on how to generate a clear and focused plan for transformation as well as succession.
A fresh outlook, together with guidance from outside professionals, can help lead family businesses through their necessary transformations. Ultimately, such an approach can clear the path for competitive advantages and continued success for generations to come. If properly prepared, family businesses can thrive indefinitely, and continue to be a boon to the growing economy of Thailand.
For further details or to book an Owner’s Room session, speak to your local Grant Thornton adviser.