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The 5 secrets of managing a family business that lasts.

"Living in a family running a family business is a beautiful gift"

Csaba Csényi

It all started at a European Marriott GSA conference in London in 2006: the guest speaker just started outlining the concept of “sustainable events”, and “green events”. Not knowing the concept back then, I remained silent and took my notes. I got really inspired and realized, I could also do that. “My wife and I could do that” – I thought. A few months later, Csilla, my wife and started managing the – back then – one and only golf driving range in Budapest, Hungary, and opened the first “green” boutique event management firm. After 14 years, the company is still in business (albeit owing to the COVID-induced restrictions, it has suffered a lot).

My personal life has changed, and I ended up in another marriage.

Surprise, surprise, my new wife Ildi is managing her family business together with her sister Orsi, a design furniture store, Mobili Mania in Budapest, Hungary. I must admit, they are doing a great job, as they have been running Mobili Mania since 1997 and it now ranks among the top 5 design furniture showrooms in Hungary.

Why is the issue so important?

 

According to the Grand Valley State University, „estimates suggest that businesses, whose majority is owned by a single family’s members contribute to 70-90 percent of the world’s GDP”. In other words, the weight and importance of this segment are extremely high.

Inherently, the families do want their ventures to last, but only about a third of the businesses make it to the third generation. 

What happens when the business starts growing and the market changes?

Well, you need to change with it! However, I have realized that this is a significant challenge for many family business owners, their wives, husbands, and siblings working in the same and for the same business.

I often heard the following: “well, I started it, I nurtured it and I know how to manage it! Leave me dealing with the business” Alternatively, amidst the challenges, a frequently heard sentence is: “oh, but I just want the best for the business”. This ill thinking leads to malfunctioning businesses as the owners, the family members often lack the ability and the drive to build structures and craft policies.

The openness of the founder is of paramount importance. The head of the business needs to understand that it is she or he, who can lead this change and it is only she or he is, who can leverage the following 5 rights, as the concept put forward by the authors Josh Baron and Rob Lachenauer of the “Harvard Business Review Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise”:

  1. The right to design – that is: the owners have the right to design what you, as a family own together, what the legal entity is that is going to operate (a foundation, a company, etc.), how do you exercise control and management, etc.
  2. The right to decide – the strategy, the design, the colour scheme of the walls, and so on
  3. The right to articulate the values – that is that it is very likely that your personal values will determine the value system of your business. You will apply this from everything you do, like investing or reinvesting the profits into the business, or grabbing a growth opportunity or not;
  4. The right to inform – you determine what you will and won’t share with the others and thereby you determine the flow of information within the company and the family, and therefore you disable or enable the others to contribute to anything e.g., making or understanding important decisions.
  5. The right to transfer – the owner decides whether or not, and when to sell or to pass on the business to the next generation.

What I find rather disappointing is that many of the owners unconsciously utilize their 5 rights and ignore building structures around them. They mix the “family-oriented approach” with a transparent, conscious and professional business leadership/management.  Therefore, as the business grows and the market changes and they believe that they are doing the right thing, while they are ignoring the key fundamental of any businesses and they do the worst to their “babies”.

 

So, what is the real secret of successful, sustainable family businesses?

  1. Be open, learn and become a professional business leader!
  2. Apply, what I read in the book by Bruce Feiler, “The secrets of happy families” and articulate your family, and thereafter your family business’ mission statement, and the purpose, why your business is in existence.
  3. Articulate the value and belief system so that your family members understand it.
  4. Be transparent in the expression of the disciplines, the governance structure, and the communication practices are vital for both the smooth and conflict-free operation and the long-term survival of the business.
  5. Bust most of all… be devoted and enthusiastic.

 

The 5th secret is probably the most important. I have never seen a family business, where the founder succeeded while being bored and tired when she or he was unable to reinvent herself or himself and thereby the business. The inherent passion and the dedication to the purpose, or simply, the business idea of the (often) visionary owner are the keys to making your family business continuously successful and qualifying for being transferred to the next generation.

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For more information on how the ADG Network Partners and Preferred Boutique Consulting Firm partners can support you, please contact us using the form on this site, or by sending a mail to [email protected]!

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Sources:

Harvard Business Review Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise, 23 Feb 2021, Harvard Business Review Press, USA

The Secrets of Happy Families: Improve Your Mornings, Tell Your Family History, Fight Smarter, Go Out and Play, and Much More, 31 Dec 2013 William Morrow & Company, USA

 

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For more information on how the ADG Network Partners and Preferred Boutique Consulting Firm partners can support you, please contact us using the form on this site, or by sending a mail to [email protected]!