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How To Build A Strong Family Business

A few months ago brought the new Harvard Business Review Family Business Handbook, a comprehensive guide for how to build and sustain a successful enduring enterprise. 

If you are in a family business, serve as a silent partner or board member, or are contemplating becoming part of a family business, this handbook is essential reading. And, even if you aren’t working in a family business, you’ll find the book enlightening because many best practices and learnings are transferrable to a non-family business. 

Family businesses represent an estimated 85% of the world’s companies, and in the US, 5.5 million of these businesses employ 62% of the workforce. Understanding how these businesses work and how they contribute to the economy is critical for post-pandemic recovery. Therefore, that’s another reason to read the book. 

Book authors Josh Baron and Rob Lachenauer take readers deep behind the scenes to share:

  • The secrets to longevity for family-owned businesses.
  • How to decode the family dynamics that impact business decisions.
  • How to plan for succession and navigate family transitions like marriages, divorces, and generational shifts.
  • How to navigate conflict in a family business before it spirals out of control.
  • Questions to ask before making the decision to join your family business.

 

Josh Baron

Rob Lachenauer

Recently, the authors answered these questions: 

What is the one thing most likely to derail a family business? 

Many people think that too much conflict is what leads to the destruction of a family business, but in reality, it’s often too little conflict that ends up there. People are so afraid of conflict that they avoid making tough decisions, discussing what they truly value, or planning for the future of the business. In our experience, too little conflict is as destructive as too much. You don’t have to like everyone in your family business, but you do have to be able to make good decisions together if you want your business to endure. 

What is the most important thing needed for a successful family business? 

Can we offer three? We think there are three qualities that great family businesses have in common -- no matter what size, industry, or how many generations in they are: curiosityadaptability, and teamwork. Those three qualities characterize most of the successful family businesses we know. They’re curious about how other businesses and families do things. They are lifelong learners. They’re willing and able to adapt to new business climates, to changes in the family, to industry shifts, and so on. And they understand the importance of working as a team. Great businesses know that family business is a team sport. You win together, or you can lose together. 

What are your thoughts about a family owning a franchise business? 

Many families own successful franchise businesses. It can be a terrific path for a family to build not only a business, but to keep a family connected and engaged with it for generations. Of course, franchises come with rules and requirements from the franchisor -- you are not as free to build the business in your own way as you might be if you started a business from scratch. Some franchisors, for example, require that only one family member serves as the owner/operator -- meaning one family member if officially in charge of that franchise. If a family wishes to share ownership among family members, that might not be the right path. Franchises can, however, be excellent vehicles for families. The particular business that a family owns doesn’t matter as much as how they approach ownership of that business, together. Are they building their business to be successful quarter to quarter or to last for generations? 

Do you believe the pandemic will impact family businesses in any unique way? 

Of course. There are almost no businesses that haven’t been touched by the pandemic in some way. But we think that family businesses are better positioned to endure the pandemic and then thrive on the other side. Family businesses are typically privately-held, so they don’t have to answer to anxious public investors. That means they can make decisions for the long-term, not just to squeak through a rough quarter or year. We see family businesses conserving cash so that they don’t have to make difficult choices, such as laying off loyal employees or completely shuttering businesses. We recently surveyed family businesses around the globe, and we found an optimism that they have weathered the worst and expect to gain ground in the months ahead. Sixty-eight percent of those surveyed believe they will have more efficient operations when the pandemic is over. And more than half believe there will be new business opportunities, more efficient decision-making processes, and learning opportunities for the next generation. In fact, a full 25% percent of those surveyed believe their market share will increase in the years ahead. 

Should the HBR Family Business Handbook be required reading for all family members in a family-owned business and why? 

Absolutely! There are so few good resources out there for the challenges -- and opportunities -- of owning a family business. And that’s in part because family businesses are poorly understood by the media and in academia. We spent years working on this Handbook to fill in that gap. We offer readers a unique understanding of how family businesses work, why ownership is so powerful, and how to navigate some of the common challenges of being part of a family business. We hope this book will help you understand not only family business in general better, but your own family business better.  How can that not be a great thing?

Thank you to the book's publisher for sending me an advance copy of the book.

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