What is the meaning of institutionalising a family business, and why should you care?

By SOCH Business Mentors LLP Posted December 27, 2022 in Family business

What is the meaning of institutionalising a family business, and why should you care?

Even the most established and sought-after family business owners ask us what institutionalisation means.

Is it a new buzzword or does it hold an everlasting usefulness and importance as it claims that we must consider caring for?

What is institutionalisation?

Many family businesses attempt to build their name, and many aims to give meaning that never dies, nor its physical existence ceases with any human-related limitations such as age, gender, ability, or anything as such.

The sense of institutionalisation is far more potent than people can usually imagine. This sense and their obligation towards keeping it growing, bringing impact and prosperity to the family is critical to understand.

It is like this – there are several thousand and millions of owners of family businesses worldwide – who, in your mind, cut across as the ones you admire, look up to and believe that will last for centuries. Any specific number of them? Compare how many you reminded yourselves of versus how many are on our planet.

This is the power of the sense of institution lived by those who own, govern, and run their family enterprise such that two far corners across the world perceive them precisely in the same ways with pride, honour, and hope.

These are those such as Walmart, LG, Samsung, BMW, Hermes (LVMH), TATA and a few more globally resilient and ceaselessly existing and impacting the world in a commendable way. Family holds these businesses in such a strong sense of institutionalisation that it enables their enterprises to thrive, flourish and add value to the world in numerous ways.

How does institutionalisation help, and what is it founded on?

It helps the good to be continuously added to the people’s lives via products, services, and solutions, including stakeholders such as employees. Institutionalization creates an unparalleled sense of belonging, which fuels further power and meaning to the institution’s success and legacy.

Because the aim behind creating institutions is a continuous existence, the natural tendency of decisions comes from a different genesis of thinking. This genesis is embodied in the first step to institutionalisation, which is developing a family constitution.

The constitution, when developed via a process that makes owners conclude tons of policies, rules, procedures, and interplay with business in a timeless effective way – the foundation is called then ready to develop further and build out of it a future promise for unborn generations to come.

The constitution is built and lived daily. It is poised to guide decisions such that the institutionalised family can now confidently thrive and prosper for centuries to come, keeping harmony in balance and bringing meaning to each member and every stakeholder.

The continuous evolution of the constitution and how families live is crucial for sustained integrity in changing times.

This evolution of the family living constitution and constitution itself is part of family governance.

Family governance, apart from enabling the powerful evolution of the family & its business, gives the family a structured approach with several mechanisms to make decisions that improves the possibility of thriving and navigating through risks and opportunity.

Along with this, it guarantees in aiding to create relevance, happiness, harmony, and unity in the family.

After these two cornerstones for institutionalising family, below are other elements, such as family office, next-generation leadership development, succession planning and similar. Together they all bring the full effect of a timelessly thriving institutionalised family business for centuries.

You know that times ahead are for never imagined growth led by well-planned and prepared institutionalised family enterprises.

I hope this helped.