How family-owned businesses continue to thrive for over 300 years?

By SOCH Business Mentors LLP Posted September 12, 2023 in Insights on Family Business, Family business

How family-owned businesses continue to thrive for over 300 years?

Everybody knows and everybody feels that the world is turbulent. If you don’t feel that today, you haven’t been paying enough attention.  

You know that today’s environment isn’t what it was 10 years ago or, for that matter, even 5 years ago.  

The pace of life is accelerating and world has become foggy in addition to the volatility. We are not sure what’s coming next as things are complex and interconnected.

And we are not sure how to read the future as much as 10 or 5 years ago. We need to adapt fundamentally and don’t have much time today to adapt to opportunities.

Businesses come and go, and there seems to be a shortage of human strength waning away in the perplexing whirlpool of current times. 

We need to be agile and change our businesses over time and generations. But the family behind these businesses can be the same for generations. Hence, family is an enduring, value-creating organization. This is what lasts, if you do it right.  

And to do it right is challenging for every family. 

Family dynamics have emotions, love, fear, power, and other complex psychodynamics. These dynamics exist in both – individual members and the family as a whole.  

These dynamics further complicate the ability to respond. The response quality and time families take can be slow. 

It is so slow that it dilutes available leverage that otherwise can build a  powerful and speedier response. 

If the family wants to thrive for generations, they must champion two major abilities.  

First, an ability to respond proactively.  Second, an ability to react to sudden and unforeseen situations or crisis. 

100% of the time, a multigenerational family that champions its ability to respond and react – has a living constitution and governance in action.  

The family governance is responsible for spearheading the leadership for winning the challenges. It helps the family adapt so that the roots of the family only get stronger and mightier.  

This happens when governance is delivering quality decisions. Decision adheres with the family constitution. Family Governance, with other supportive and administrative elements, helps family leaders decide. The leaders get support from such disciplined systems. The systems increase their ability to navigate the family enterprise manifolds. 

There are families in the 9th generation we had the privilege to work with. They are UK-based. They have weathered all calamities caused on the planet in the last 350 years, ever since they began in 1673. When you see them, their children in the 10th generation are a sheer delight to the heart. They are clear, loaded with confidence, and carry remarkable humility.  

Behind this front-face, these families have a very powerful engineering. 

An engineering of decision-making, ultra-seamless communication, administration prowess, crisis management centres, disaster recovery, business continuity, family heritage, constitutional temple, and powerful family offices create value for family, business, society, nation, and even the world. 

This helps them live superior lives and thrive for generations after generations. This engineering is comprised of three cores and nine sub-cores. These bodies’ architecture and systems help families grow their businesses, identity, and impact. 

The three core elements are: 

(1) The family governance: A vital decision-making body for family to thrive and survive

(2) The family constitution: This is a guiding reference for all decisions. Governance uses this for integrity, mission, and impact 

(3) The family office: This is a professionally run, constitutionally aligned body. Its core job is to action the decisions that family governance passes on.  

All matters about family as an institution get executed by the family office. E.g., capital developments at human, social, ecological and environmental levels, lifestyle management, finance & investments, next-generation, philanthropy, risk management, and many other non-wealth and wealth-related specialised functions. 

These core and sub-core elements help families resolve the following: 

  • Conflicts: It is inevitable. The systemic ability of the family to evolve stronger through conflicts is a major strength. These 300-year-plus family enterprises have championed systems and models to resolve and pre-empt conflicts. 
  • Succession: Who should take over the family business? This is still the most common challenge, and it is very relevant since it will eventually affect all family businesses. Succession is difficult because there are so many dimensions to it.  

Usually, people avoid all dimensions necessary except the who?  

Who should take over ownership, and when and how much? Who should take over the executive leadership? Should it be a family member or an external individual?  

These questions often spark many emotions within family businesses, and efficient communication is thus key. 

These 300-plus family enterprises have championed systems and models to conduct legacy transition points gracefully. They have mastered procedural and structured processes focusing on important dimensions that aren’t related. 

  • Difficulties of letting go:Many owners of family businesses have worked in the business for a long time; they may even be the founders.  

It is only natural that they have difficulties letting go. The core and non-core elements help families deal effectively and timely with this. 

  • Lack of external influence:Unfortunately, owners find it very challenging to open up to the influence and involvement of people outside the immediate owner’s family circle. 

This lack of external influence can lead to groupthink and tunnel vision and, consequently, the risk of missing important business opportunities or signals of the need to change. Having the core systems in place creates a vast opportunity for the family to expand its horizons of thinking, doing and leading. 

I hope this gives a tip of the iceberg of how lasting legacies lived by family enterprises over centuries. 

In our 25 years of serving nearly 116 global UHNI & family businesses, one realisation comes from almost all of them: “To begin the journey of institutionalising their family business timely i.e., as early as possible” 

The dollars, euros and sterling pounds in millions hold real less value when the constitution and its governing systems begin delivering the business value in billions and life value in priceless currencies.