In addition to running the company, an integral part of a successful family enterprise leader’s job is tending to the needs of the family which owns the businesses, whether or not they are a family member.
During a recent meeting with the chief executive of a large family-owned European company, we were discussing his succession plan when he stepped aside to take a call. It was from the daughter of a family shareholder on what we later learned was a tricky health matter.
The fact that he took the call was not entirely surprising, but we witnessed how genuinely interested and sensitive he was in supporting the daughter through a difficult conversation. The call ended and the CEO – who was not a member of the family – seamlessly returned to our business meeting, conveying through his actions that dealing with the highly personal issues of a family shareholder was an integral part of his leadership responsibilities.
For years, our field has placed most emphasis on the importance of developing strong leadership for a family business. This bias is understandable, given how prone family companies can be to nepotism and the disastrous consequences of choosing unsuitable successors. But we believe that developing an ‘ambidextrous’ capacity for competently leading both the family and the enterprise, is essential for effective leadership and continuity.
Businesses such as Viacom, Hyatt, Hunt Petroleum and Market Basket have shown that family companies can struggle, not because of market failures, but as a result of nasty battles among family shareholders. Such fiascos often result from a failure of effective family, rather than business leadership.
The sustainability of family enterprises requires more than effective economic performance. It requires nurturing the unity of the family owners and their commitment to the proposition that a future together is better than a future apart. This needs the tireless dedication of one or more leaders who understand the strategic importance that unified and committed family ownership can bring to an enterprise’s continuity. They understand and seek to strengthen the emotional bonds between the owners, not just because it helps accomplish business objectives, but also because of its value to them as a family.
The ultimate value proposition of family enterprises stems from the effective management of two fundamentally different types of assets: one emotional, and the other economic. The success and continuity of these systems depends on the effective management of both by those who manage to operate in the shaded zone in the figure opposite (adapted from the work of our colleague John Ward at the Kellogg School of Management).
By controlling the economics of the family, those in leadership roles in the business typically wield considerable influence among the family owners. They are therefore uniquely situated to facilitate relationships both within the owning family and between the family and the enterprise. Too often, however, this fundamental leadership responsibility is diminished, dismissed or denied: countless times, we have heard family business leaders say that their job is to run the company, not the family.
Such leaders fail to understand that the fates of the family and the business are inextricably intertwined. Indeed, the strategic advantages of family enterprises – their commitment to the long term, their values and cultures as well as their strategic innovation and dynamism – is derived from the effective management of these interdependencies.
Likewise, the risks associated with family business – their propensity for nepotism, their imprisonment in legacies of the past, their sometimes lethargic response to industry changes and their vulnerability to dynastic ownership breakups – require leaders who can straddle the linkages between family and business and understand how their decisions influence (and are influenced by) both realms.
Those leading family enterprises cannot afford to overlook the needs of one system at the expense of the other: they must manage both without compromising the integrity of either.
They must strive, in other words, to become ambidextrous leaders who grasp the interdependencies of emotional and economic assets and work for the long-term sustainability and growth of both. They understand that leading a family requires skills and sensitivities that are different from those for leading a business.
Moreover, ambidexterity requires skills that go above and beyond what the family and the business may need. These include:
- The capacity to manage the paradoxes that come with systems in which the needs, fundamental values and norms are often inherently in conflict – for example, accountability vs forgiveness, merit vs need and best to the top vs inclusion.
- Integrative thinking that can craft strategies which synthesize and harness elements of both modes – for example, embracing a ‘tradition of change’, or nurturing ‘dreams with deadlines’.
- The ability to respond effectively to complex situations, such as by injecting familial values into hardnosed strategic deliberations of a board.
- The flexibility and sensitivity to know – like the CEO in our example – when acting in a family or business mode is called for.
- The emotional intelligence to understand and channel emotions to followers to help them function across family and business domains and to cope effectively with their contradictions.
Ambidextrous leaders track their strengths and deficiencies in such skills and try to enhance them. They often join with others in the board and in the family who complement them to ensure the proper tending of both family and enterprise.
Strengthening their ambidexterity bench among aspiring next generation leaders requires families to structure opportunities designed for this purpose. They signal from early on that family unity is as important as the performance of the business, and make clear that serving on a family committee or the family council is required for reaching upper leadership in the company or serving on its board.
Likewise, they work to educate those hoping to emerge as family leaders to enhance their business and corporate governance knowledge. They also encourage senior leaders to share with potential successors how they have managed (or mismanaged) the careful balance of familial and economic assets, and the lessons learned when dealing with consequential paradoxes.
In short, successful families invest to develop well-rounded, ambidextrous family enterprise leaders who can learn to synthesize strategies that work to sustain both systems in the long run.
In a world hungry for simple solutions to complex problems, learning to navigate the complex interdependencies and contradictions inherent in the long-term strategic dilemmas facing humanity is undoubtedly an essential leadership capacity for our future. Family enterprises can provide a unique platform for fostering ambidexterity in the next generation of world citizens who will inherit the thorny dilemmas of our age. Why couldn’t that too be an exciting part of the legacy!