The Five Trends of Family Business
Five Trends of Family Business
A client recently asked me an interesting question regarding family business: what are the five major trends you see in family business? The question is a good one. If you wanted to answer this on your own, you could try to get through the Wall Street Journal or your local newspaper (if you still have one), if for no other reason than to add credence to the trend that reading is the leading cause of depression. I would not advise it because even a simple escape article on fashion offers tips on how to dress for the recession.
So in order to protect you from any further depression, I offer my take on the five mega-trends that I see in family business in 2009 and beyond without the E or R words (that is economy and recession in case you have not been paying attention).
1) The New Demography. In every inch of the world the human species is changing and doing so very quickly. While it might not feel like it sometimes, humans are better off today in terms of health, wealth, and the basic human condition than at any time before. The result is that we are living longer, and this alone is straining society. Another complication is that technology and industry have made us a very mobile and interconnected society particularly regarding business and culture. The impact on family businesses is tremendous in terms of succession planning, which now is further complicated by people living longer.
But perhaps the most profound impact, is the “stack-up” of various generations in the family and the business that has resulted from longer life-spans and delayed retirement. Furthermore, cultural and societal norms are stressed by the melting pot of positions, expectations and perceptions that are all culturally and generationally valid. The problem is that there is no easy way to make decisions when everyone is right from their own perspective, and when the old rules no longer apply.
Hot Spot to Watch: China’s life expectancy has increased 8 years in the last 20 years, as well as the documented disparity of males to females (currently estimated at 20 million more males than females), and then add into the mix of ancient cultural norms of birth order, birth right and gender clashing with the modern generational pressures.
2) The New Diversity - Generational Differences. In the United States we are faced with the new reality that we have five distinct generations in the same house and work place. The five generations GI Generation (1905-1924); Silent Generation (1925-1944); Baby Boomers (1945-1964); Generation X (1965-1980); and Generation Y (1981-20??). Each generation has its unique outlooks, perspectives, communication styles, and perceptions. The result is a living “Tower of Babel” where each generation has a difficult time understanding, communicating and working with each other. Family businesses must pay careful attention to build bridges and understanding between the generations.
Hot Spot to Watch: The “stack-up” of ownership with the GI Generation and/or Silent Generation, as Baby Boomers wait for their turn to lead and own, while right on their heels are their own Generation X and Generation Y children expecting their shot at ownership/leadership.
3) What is Family? Many people might not be aware of the fact that one of the most contested debates amongst academics, government officials, sociologist, anthropologist, psychologist, and theologians is how to define the modern family. Forty years ago most Americans defined family as that of kinship through blood and marriage. The current demographic realities represent a society with a decline in marriage, rise in cohabitation, increased divorces, multiple remarriages, and re-parenting. The question for the family business is how do we define family? This basic question should be asked often, as the dynamics of the family continues to change over time. My experience with clients that ask this question that are able to talk about whether they choose “blood” only, or have the most open definition, is that they spend time thinking about and discussing this fundamental question that propels the family business.
Hot Spot to Watch: With an increase in remarriages and the phenomenon of “his”, “her” and “our” kids succession and estate planning can be complicated and the role of an outside expert can be extremely helpful for a family business to navigate these challenging areas with the hope of still having a good holiday season.
4) Power of Spouses. Some time ago, Dr. Leon Danco’s classic book Beyond Survival warned the family business leaders’ lack attention to the in-laws and spouses was the quickest recipe to family business disaster. With more generations in the mix, along with the increased complexity of family roles, Danco’s point is even more important. Today spouses and in-laws are far more likely to be inquisitive, expect to be involved, and are more aggressive in voicing their opinions. Let’s face it, the family business has tremendous influence on all relationships within the family and the stress that resonates from a family business can severely impact every relationship. To be successful, the family business must look at the system of family ownership and management like a good party where everyone brings something. This means that each person has at least one clear role, an opportunity to contribute, and has a free flow of communication.
Hot Spot to Watch: Failure to communicate and educate spouses about the business and leave time for the family leads to misunderstanding and poor communication. At the same time, failing to respect the contributions of spouses and the boundaries between family and business is certain to lead to serious problems.
5) I Am Too Busy. I am known by family and friends for making silly but simple New Year's resolutions. A couple of years ago I decided that I would attempt to go the entire year without saying the phrase “I am too busy”, or I would find myself and/or be publicly admonished by my family or friends. I can tell you this was one of the most challenging New Year's resolutions and it took me until about October to break the habit.
The point is that we are all very busy as our lives are packed with social, work, personal, family, community, commitments, and events that run our lives. The simple fact is that is there nothing more important than our families. And if we have a business, it also needs to be a high priority. We know that in today’s world if it is on our calendar we usually get it done. Then doesn’t it make sense that we put time on our calendar to spend time with our family to get to know each other as adults socially? This is not only important for one generation but it makes the time for the next so they can build their relationships as adults and business partners.
Hot Spot to Watch: In the model of generational handoffs of siblings to cousins we must acknowledge the fact that our time together as siblings and cousins has diminished as we become more mobile and geographically dispersed, as well as the increasing time constraints placed on us by busy calendars and lives. We must make the space in our lives as family business people to interact socially if for no other reason than to build bonds with our children and expand our knowledge of each other as adults. Check how many times you say, “I am too busy”.