“First recognize that for any group or organisation to be successful it needs to be led, managed and governed well” John A Davis,PhD Harvard Business School
Most family businesses fail because they lack the discipline, governance structure and leadership to handle all of the challenges they are going to face. They mishandle or fail to plan for succession transitions. They do not communicate effectively in both family and business. They ignore the need for innovation in a fast-moving world.
John A Davis has written a series of articles for Harvard Business School on the importance of leadership in family businesses. While our initial thinking may be on the business leadership, he points out the importance of the role of leaders in the family group as well as the leaders in the ownership group.
Strong and effective leadership in these other two areas cannot be overlooked as they are so strongly linked to the performance on the family business.
Having one person initially lead the business, ownership and the family is the natural choice for family businesses around the world (the “parent-founder-business leader-controlling owner”). However as they grow in size and complexity, identifying others to share leadership roles is critical to their sustainability.
But what are the red flags for when it is time to structure and allocate new leadership roles in your family business?
1. If you are approaching the cousin consortium stage. It is guaranteed that your family and business is too complex to be managed by one individual.
2. When your business has diversified and there are manager/leaders across the systems. You need collaboration to remain united.
3. If the leader, even at the founder stage, finds themselves bogged downin family and ownership issues. This will happen and there are only so many hours in a day.