- September 24, 2021
- Posted by: Veera Salman
- Category: Blog
As the name suggests, a family business is an organization comprising multiple generations of a family; who may or may not be related by blood (related due to adoption or marriage). It is the oldest yet the most common model of organization. According to statistics from the Family Firm Institute, family business companies represent two-thirds of all the businesses around the world. Furthermore, they generate 70% of the annual global GDP. Rarely it happens that there appear to be no pitfalls and drawbacks in a system. So is with the family business. According to the statistics, 30% of the family businesses remain feasible once transferred to the second generation, and this decreases to only 3% once it reaches the fourth generation. This degeneration due to generations threatens the survival of family-owned businesses. There is a need to address this problem and work proactively towards resolving these issues for the smooth functioning of family businesses. Jibran Bashir Leadership Institute devised a service called the Family Business Leadership Consulting (FBLC) regarding such issues. It focuses not only on the family business system, which involves three dimensions i.e., family, ownership, and business, but it also takes into account their interrelationship. FBLC is based on the 4Cs experimental process that consists of Collection of Information, Case Study Writing, Constitution Development, and Coaching for Family Business Leader. Consultants can use this 4Cs’ Framework to effectively transform the family businesses of their clients in terms of leadership and management.
Family Business Leadership
Leading a family business is different and more complex than a non-family-owned business. It is because there is both; the family and business. So, family business leadership is the art of making people believe and act on a shared vision in multiple contexts of family, business, and ownership. The leader of a family business is faced with several dilemmas. For example, he/she has to decide whether to prioritize business or family, should the business be family-managed or professionally managed, should it remain private or go public, should love or discipline be practiced. Such leaders have to be rigid enough to steer the organization in the right direction based on the principles yet flexible enough to change leadership style based on the situation.
Family Business Constitution
A constitution is a formal document that provides the basis for governance in a country and ensures that the interests and needs of everyone are addressed. Likewise, a family-owned organization cannot work without a constitution where several people of the same family are involved. So, a family business constitution is a written document that acts as an agreement between the family members. It sets out the rights, principles, obligations, and rules applicable to family business members. Moreover, it sets out plans and structures for dealing with both; certain and uncertain circumstances. Hence a well-developed family business constitution ensures the power, evolution, and last but not least, the family heritage.
4Cs Process of FBLC
Family Business Leadership Consulting is a processed approach towards helping family-owned businesses to work smoothly without issues occurring due to family involvement. Following are the steps constituting the 4Cs process of FBLC:
- Collection of Information
The first C of the 4Cs Process is the collection of information. When the family business consultants will do so, it will enable them to access the issue, understand the family and their business combined. Answering their relevant question becomes easier, outcomes can be evaluated, and future probabilities and trends can easily be predicted. Furthermore, it will help to make informed business decisions. Information needs to be collected from three areas of the family business; the information of family, the business data, and ownership concerns of each member involved.
- While collecting information regarding the family, the consultant must consider the dynamics of the family in terms of the family tree, family background, and family relationship problems concerning family vs. business growth and family member’s conflicts. This can be done by conducting one-on-one interviews with the family members.
- While collecting information regarding the business, the first and the most important step is to gather the annual reports of the past three years that cover both the financial and non-financial aspects of the business. This document includes the comparative financial statements, management’s discussion, and other information about the company. With this, the consultants will be able to know the financial position of the company, the financial performance of the company, and the overall financial well-being of the company. Moreover, information regarding the board of directors, annual general meeting notice, the pattern of shareholding, and the non-financial areas can be collected from it.
- For collecting the information regarding the ownership, one-on-one interviews with family members of the client, through Psychometric Examination, and the analysis of certain official business records are helpful.
- Case Study Writing
The second C of the 4Cs Process is the case-study writing known as the Gap Report. Sometimes it is written at the end of the whole process for the consultant’s information and record. However, if allowed by the client organization, it can be written right after the information is collected. It includes the As-Is Picture of the family and the family business issues. It helps to create an understanding of internal complex matters. In the context of FBLC, the case study covers the current condition of the client’s family business and difficulties related to family, ownership, and business in such a way that all the representatives of the client’s family can recognize their problems and, in particular, the root causes of all problems.
- Constitution Development
The third and crucial step towards FBLC is the development of the family business constitution. It takes into account the following four steps:
- First of all, a family task force needs to be formed for the family constitution development. It is well worth spending time creating a task force and on process problems before getting into the substance of the work. It aids in deciding and agreeing on the procedures for future family meetings.
- Once the task force is formed, the next step is to start and execute the process of the Family Constitution. Here the consultants will initiate and conduct the process of writing the constitution. It will require a series of review meetings and the drafting of this constitution.
- As a third step, a detailed document of the Family Business Constitution is produced. Majorly, the contents of the constitution will be the history and the current status of the family, mission and vision of the business, values of family, the role of family members, details of various policies, inheritance matters, exit strategies, etc.
- Last but not least, the family business constitution is to be communicated to the family members at a formal meeting. This way every family stakeholder will know about every aspect of the family document. So, once the constitution has been developed and communicated, its implementation stage will begin.
- Coaching for Family Business Leader
The last step in Family Business Leadership Consulting is the coaching of the family business leaders to act more like a leader than a manager and focus on the more important matters. This is done in several one-on-one coaching sessions and also group sessions where required. These leaders must develop situational leadership, emotional intelligence listening skills, conflict management, family leadership, frugal lifestyle, etc. The coaching is for the current business leaders and the leaders of the next generation. Their coaching is based on a 4-L family business management framework. The coach will help the next generation learn the business in general first. Later, he will coach them to learn more about their family business in-depth for them to run their family business. Lastly, the coaching will be on how to let their family business go.
Why seek Family Business Leadership Consulting?
Even if it is clear what FBLC is and how it is carried out in an organization, there might still be some queries regarding why should a family business seek this consulting service. This service plays a pivotal role in the growth and continued success of a family business by resolving their issues. It helps to add value to the organization by maintaining themselves and expand in a managed way. It develops the people of the family business as leaders who are then able to resolve the aforementioned dilemmas and pitfalls. Moreover, it helps the businesses that seek to resolve the conflicts and their potential areas. Family-Owned businesses (FOBs) have their leadership problems and are unable to succeed much of the time to transfer their ownership to the second or third generation. It is therefore important to support FOBs through professional family business leadership consulting services in a way that family businesses must retain. Although there are problems in the family business that are different from those of a non-family business and arise due to the imbalance in dynamics of family and business systems, still the involvement of family in business as managers and owners strengthen the company. It is because the family members are often loyal and dedicated to the family enterprise.
Family Business Leadership Consulting is one of the services developed and provided by Jibran Bashir Leadership Institute. It revolves around resolving the issues of family businesses and provide them with a systematic approach to move forward through its framework of 4Cs. First, the data is collected, the case study is written, and a constitution is developed. Once these three steps are complete, the last step is the coaching of the family business leader. Sometimes the coaching is done before making the constitution, and writing a case study is an optional but suggested step.