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Three factors that contribute to healthy family business ownership

Published 21 September 2021 in Brain circuits • 2 min read

Every business strives to be healthy, but unique factors that come into play at family-owned enterprises. One of the advantages of family-owned businesses is that they tend to have a highly concentrated ownership structure, allowing for effective and efficient decision-making. This can be critical in times of rapid change or crisis.

However, if the ownership group’s decision-making is impaired by some external shock (such as the loss or debilitation of a critical member of the group) or conflict among family members, it can stifle the business. A healthy business has an ownership group that is emotionally connected, well informed and capable of taking responsible decisions in the interests of various stakeholder groups. It has also nailed down the following three factors:

There must be a clear ownership vision and strategy for the organization

This vision must take into account the family’s values as well as the needs and priorities of the business. It should be clearly articulated to all members of the family including future generations.

Owners act as stewards to the business, its employees, and its customers

Raising the next generation of responsible owners who feel a sense of duty and responsibility, but also privilege and pride, is critical. You should allow younger family members to grow into a position of being emotionally connected to the legacy of the business.

There must be a long-term approach to the business

Owners often see a quarter as 25 years. As such, healthy ownership takes a patient and measured approach to planning and decision-making. It is important to avoid being distracted or lured into short-term achievements at the expense of the bigger picture.

These factors all play a critical role in not just the longevity of the business, but also ensuring wealth preservation and, ideally, growth.

Authors

Peter Voegel - IMD Professor

Peter Vogel

Professor of Family Business and Entrepreneurship at IMD

Peter Vogel is Professor of Family Business and Entrepreneurship and holds the Debiopharm Chair for Family Philanthropy at IMD. He is also the Director of IMD’s Global Family Business Center. He is the Program Director of Leading the Family Office program.

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