As I have mentioned previously, I am writing a novel about a family-owned business where the CEO is suddenly incapacitated. My experience has been in large corporations, but the issues of succession in a family-owned company intrigue me. What do you do when the next generation of family members doesn’t have the financial or marketing acumen needed to meet the business challenges of the day? What happens if there is conflict between family members in setting the direction for the company?
There are times when working in a family-owned business has its advantages. I read with interest a recent article in the Washington Post , Focused on next generation, family businesses are often more resilient when times are tough, published April 3, 2013. This article says family businesses are better able to focus on long-term strategies during business downturns. The article quotes Pramodita Sharma, a University of Vermont business school professor, and editor of the Family Business Review, as follows:
“What differentiates family from non-family enterprises is the significant influence of family in business and focus on the long term. They work not only for the current generation of the family but also the future.”
That statement is almost a tautology – of course, family influences a family-owned business. But the larger point is that it is easier to focus on the future in a family-owned company, where fewer people control the decision-making, and they presumably have more aligned goals.
All business leaders should be working for the future success of the business, but the definition of “future” must be set by directors and shareholders in larger corporations – is it the immediate future or the long-term?
The question of what does “future” mean can certainly arise in a business of any size. Some family-owned businesses may want to focus on permitting an aging founder to retire. Others want to plan careers for grandchildren. Others want a lasting legacy in their business. Where differences between family members’ goals arise, discussion and even negotiation or mediation may be necessary to set the pace and direction of the business.
But in large businesses, with impersonal shareholders looking at the profitability of one investment versus another, resolving the question of which future to plan for becomes incredibly complex. Setting direction may become the basis for proxy fights and shareholder lawsuits.
In all cases, transparency and clarity help in setting corporate goals – whether to resolve family disputes or proxy fights. But not all business leaders are skilled in either transparency or clarity.
What do you think? Should businesses plan for the short-term or long-term future?