We recently got to know a century-old multi billion-dollar European private family firm with operations in several industries throughout the world. With family members participating in the business from the 5th, 6th, and 7th generations, the family has developed and articulated some very strong principles to which they attribute their success. These include:
The family has a clear mission: “To perpetuate the family and its values.” They state directly: “The business is a means to provide the economic strength necessary to achieve the family’s values and ideals.”
Family members are all equal in ownership benefits and involvement regardless of their branch or size of their branch. In fact, the family tree and family roles are organized by grouping members of similar ages rather than family branch. Financial distributions and involvement opportunity are offered equally to all as individuals, not as representatives of family branches.
Leaders in the business and in the family are selected strictly on accomplishment and ability, not on age or ownership.
Family leadership is a critical, full-time job. For more than 50 years, this family has had family leaders who have seen their responsibility as the welfare of every family member and their role as facilitator of semi annual family meetings. The family leader spends time with each family member to understand his or her needs and to coach each one’s development. The family leader works to explain the family’s values, principles and philosophies to each new generation and seeks to educate new in-laws on the ways and beliefs of the family. Whoever serves in the family leader role also guides the continual development of the family’s conceptual framework.
High Standards for Family Participation and Development
Family peer pressure for an excellent education has continued for generations. Family members go to the best universities in Europe and North America. They are encouraged to work outside the family business for several years. When they enter the family’s business, they are given opportunities in several regions of the world to prove and shape their abilities.
Family Member Preparation
In addition to formal education and broad experience, family members are personally coached and tested in several areas:
- People skills—so that family members can attract and develop rapport with the most talented non family managers.
- Risk taking—so that family members can recognize new opportunities and translate them into profitable businesses.
- Family values, including accepting personal accountability; being modest; giving, not taking; taking the long term view; supporting, rather than punishing people who make mistakes; building trust; and appreciating the importance of personal and family reputation—so that the family and its business will live on.
Family Harmony and Strength
The family’s written Family Code prescribes individual efforts to minimize the human frailties of envy, power, greed and ego and spells out the desire to assure a strong family for the future. The Code states that work is important, but not as important as the preparation of the next generation. The Code offers several rules and precepts including:
- Good parenting requires spending time with your children.
- No in-laws may work for the business. To assure the business’ strength, the family depends on those who’ve been brought up in the family’s culture with its values.
- In-laws need to be integrated into the family. They usually come from very different backgrounds and need to learn the family’s ways.
- Family compensation policies encourage modesty but provides housing, sustenance, health, education and social needs. Compensation levels are based on personal considerations, not business contributions.
- Most of the family’s wealth is directed to the Family Foundation to help those less fortunate in society. The family takes a hands on, active personal involvement in its giving.
- Family members do not hold executive positions; consequently, no family member ever needs to be fired for incompetence nor crowds the career paths of non-family executives. Instead, family members are very “active owners,” who stay very close to the business’ non-family executives. Final decisions about business belong to the non-family executives.
In sum, the family believes that income based on need with a modest life style, involvement as owners but not executives, decisions by consensus, and generosity to others lessens the risk of family jealousy and conflict.
Individual family members neither own nor vote the shares. All the stock is held in trust with an indefinite life. The family has retained a prestigious law firm and its chairman serves as trustee. The firm’s successor chairmen are successor trustees. The family’s fundamental belief is that “We come into the world with nothing and we die with nothing, so inherited wealth differences won’t divide us.”
The business is a powerful example of capitalism: seeking the best executives to build a global business that encourages entrepreneurial risk taking and the long-term view. But the family’s values have forged what can best be described as a communist system that keeps ownership for the future; compensates family members based on need, not contribution; makes decisions collectively; and gives most of its wealth back to society.
“Family Communism” won’t be for everyone. But it does offer a comprehensive model for families to consider.