Building a Family Enterprise That Lasts

Family unity is the cornerstone of a lasting family enterprise because it allows for smart decision-making around the longevity of the business. It facilitates the family to move in the same direction in support of the same goals, which leads to smart decision-making around the longevity of the business. It can also lead to an understanding of the family’s shared mission and core values as it pertains to the business and the family itself.

Family governance is a framework for family direction and decision-making based on a shared mission and goals, and it is often separate from the operating businesses. Some families may hold a Family Assembly or regular meetings during which family members learn and plan for the future. A family-council working group can help propose policies on matters such as family employment, family unity, family communication and talent development. Some families create a separate ownership council, composed of some or all of the family business owners, to align on what the owners want for the family enterprise, including guiding principles on direction, risk management, capital allocation and dividend policy.

Each member of a family has a unique set of skills and interests. It’s important to identify roles for different family members that capitalize on their own passions and strengths, with the intention of aligning their interests with those of the business.

Establish a process to evaluate the next generation of leadership and ownership using an assessment that measures qualifications, skillsets and interests. Then, use those assessments to map out development plans. Some may work in the family business; some may occupy other roles in the larger family enterprise. Remember, there are many roles—shareholders, board members, philanthropic leaders, wealth creators, wealth oversight, governance members, family council leaders—and there should be a place for everyone who wants to participate and prepare themselves.

To create a business that succeeds from generation to generation, the next generation has to be excited about it. Cultivate interest and a sense of accountability for business decisions and share information about the family business and investments. Teach younger generations the family history, values and basic leadership and ownership skills.

“If you want to create a business that succeeds from generation to generation, you have to allow the next generation to become excited about what you’re doing and help them become qualified to contribute,” Hier says. Some families set up an education committee to direct learning and keep family members motivated.

Hier says successful multigenerational families develop their family identity and culture as learning families, ensuring that each generation acquires the critical skills and understandings necessary to become good stewards of all aspects of the family enterprise. “These families prioritize learning together as an ongoing, life-long activity.”

Families may want to consider how the strengths of the current business may apply to other sectors or industries that show potential for growth over time and that align with the family’s values, skills and interests.

Take, for example, a prominent family whose business originates in news publishing in markets with many automotive advertisers. From there, the business can successfully expand into content curation and product research for the auto industry, ultimately becoming a leader in those areas as well. Such thoughtful diversification into related lines of business can be key to the longevity of the family enterprise.

Families that plan to transfer a business to heirs should consider what a successful transition of ownership, governance and management will look like for the next generations. For the family member(s) currently owning and/or running the business, this process may include important financial and ownership decisions around: 

• Gifting equity to children—either outright or in a trust—in a tax-efficient manner
• Bequeathing equity at death, with an eye toward addressing any family conflicts that may arise based on shared ownership
• Ensuring there is sufficient liquidity to pay estate taxes after you pass

There are also non-financial decisions to make when planning for succession in a family enterprise, such as:

• The role of the family in the organization
• The leadership model and governance structures that will fit the next generation’s skills and the evolution of the family enterprise
• The process of gradually transferring responsibilities and authority as milestones are met