It was truly insightful to attend the lecture by M.I.T. Sloan School of Management Senior Lecturer and Faculty Director, Prof. John Davis: Sustaining Family Business Success. The session was attended by a number of family business leaders, family offices, board members, advisors, and esteemed academics.
A question crucially important for family businesses was raised, that has been neglected for far too long – survival. As the findings of Prof. Davis show, while some family businesses are sold, most fail over time. By the fourth generation, only about 10% of family businesses survive.
Why do we see this happen so often? Along with the issues that family businesses face today, including industry consolidation, new competitors in the market, rapid innovation and digital disruption, changing demands and regulations, and socio-political uncertainty, the other serious challenge is succession failure.
Ensuring succession is vital for survival of the business run by a family. “It is a strategic process to ensure revitalization of the family enterprise that takes place over years.”
Having been blessed with a large circle of other family businesses and dynasties, I, sadly, too often witness conflicts that lead to succession disruption. These conflicts start occurring when the younger generation loses interest in following their fathers’ and grandfathers’ footsteps, even when they are expected to. Most often, it happens when the children in the family feel left out, are not appreciated for their input, have an alternative vision, or are not trusted by the parents to take on a bigger responsibility. As a result, they gradually stop getting involved in the daily business activities, drift away from the family home, find another place where they can apply their skills and talents and, finally, receive that sense of self-validation they have been craving for.
However, this is a rather dangerous mistake. As highlighted in the lecture, while there might be only one CEO, there are other key roles without which a family enterprise simply cannot survive such as value and wealth creators, executive leaders, governance members, global networkers, social impact leaders, and family unifiers.
And since families are becoming smaller and smaller, especially in the United States and in Europe, each member becomes vital for the family business survival, success and stability.
According to the research presented by Prof. Davis, 84% of family business owners say “moderate to radical change will be needed for future success”. However, only 29% (!) “feel very ready for change in their family enterprise”. This proves the change is needed. And that change is needed NOW.
The foundations of family enterprise success, as Prof. Davis found, are the high performing and enduring enterprise, capable and aligned management and organization, loyal and capable owners, and the last, but certainly not the least – united, industrious and contributing Family.
I strongly agree with that view. As I have previously stated speaking at various humanitarian conferences and on my channel, without a strong family unit, there will never be a strong nation, and there definitely will never be a strong enterprise. In order to break this vicious cycle of countries tortured by wars, cities and towns drowning in debt, businesses going bankrupt, dynasties falling apart, families being broken, we need to start from the beginning which is at Home.
A home can not be sustainable without a solid foundation. How can we ensure our Home has one? The one and only answer to this was, is and will indefinitely be – God. When He is truly the foundation of our Home, our little Church, our Family, there will never be destruction. Nothing can threaten a Home built on the divine commandments, Faith and Love. Such Home can await only abundance, prosperity, joy, and blessings.
25 The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock.
18 My people will live in peaceful dwelling places, in secure homes, in undisturbed places of rest.
1 Unless the LORD builds the house, the builders labor in vain. Unless the LORD watches over the city, the guards stand watch in vain.
25 Jesus knew their thoughts and said to them, “Every kingdom divided against itself will be ruined, and every city or household divided against itself will not stand.”
If we look at the business from this perspective, everything becomes clear at once.
May God Bless the DIFC Academy, DIFC Family Wealth Centre and the MIT Management for organizing this wonderful event today that inspired me to write this important message.
Countessina Anna De Bacci
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