During the new millennium's first decade, I worked with Citibank Private Bank in New York as its "family and corporate governance champion". It was an elegant way of saying that it was my job to support family business owners in their goal of building dynasties to keep their families unified over generations and help their family-owned businesses to perpetuate.
"An easy job? Research shows that 70% of family-owned businesses do not survive the second generation and only 13% the third generation. Furthermore, business succession failure also heavily weighs on family relationships."
The insights from being involved as an external advisor, executive, and board member in family-owned businesses from Tierra del Fuego to Vancouver during the last two decades showed me that the human factor is the single biggest obstacle to achieving family business sustainability. It may therefore come as a surprise that emotions and perspectives, the forces that drive human behavior, are rarely addressed by advisors in the family governance space. To service my clients better, I took a deep dive into neuroscience and understanding the human mind. Little did I know that this new learning would awaken a passion for leadership coaching and, as some call it: "family business coaching."
Before discussing family business coaching, let's reflect on the family business.
How to define a family business?
A family business is a company whose ownership is controlled by a single family where two or more family members significantly influence the company's direction through management and governance roles, ownership rights, and family relationships.
Why family business coaching?
To understand the "why" of family business coaching, it is important to understand the ups and downs of the family business.
The human factor can be the business' principal blessing and challenge when family members work in the company. Its success depends on the owner's ability to handle the interplay of family system issues and business system challenges.
The family business may find its strength in a stable ownership group and a long-term and patient perspective. It may have a mission of excellence embedded in ethics and family values and demonstrate solid loyalties and a strong sense of belonging.
On the flip side, there may be competition over resources, power, status, and rewards. Family relationships can be emotionally sensitive. Memories can last long, and there might be concerns about productivity, fairness, decision-making efficiency, and role confusion. The problems in one relationship tend to cross-contaminate the other relationship.
"Nepotism and professionalism are entirely compatible in the family business."
In summary, the key challenges that these families are facing are:
1. Understand and align family values.
2. Deal with the big elephants in the room (the family emotions).
3. Control nepotism in favor of professionalism.
4. Establish systems to maintain family control of the business.
5. Develop internal or external professional management to remain competitive.
6. Create a smooth generational transfer of management and ownership.
7. Perpetuate family success over generations.
"The challenge is to exploit the benefits arising from the family nature of the business while managing the human factor."
What is family business coaching?
Family business coaching is a positive approach to long-term and sustained leadership development within the family business environment and a valuable complement to creating enduring family governance success. Family business coaching focuses on the family as well as the business.
How does the family business coaching process work?
The family coaching process requires a subtle approach to ensure that all family members receive appropriate attention. While the coach's approach should be delicate, it must also be rigorous and fact-driven.
The process starts with data collection through confidential, in-depth interviews, allowing the coach to connect with the individual family members so that they feel they are relevant and their voices will be heard. The coach needs to listen to them to appreciate their perspective on what they think the challenges are. Only by understanding their expectations, values, mission, and vision can the coach personally relate to the family members and build trust with each of them. This creative and collaborative process helps the coach appreciate where the resistance and accountability are while giving the family members the confidence that they are safe in this process.
The purpose of the data collection phase is to create a detailed map of the family dynamics while building trust simultaneously. This is not a weapon but an opportunity for everyone to get the best out of the system.
Once the data collection has been completed, the coach will meet with the family in a group session and discuss the data from the initial interviews and the learning. During the meeting, questions may arise, such as what it means to be a high-performing team and how the family wants to experience their family brand. What does it take to make it work well?
The aim of the family group meeting is to build an inventory of challenges and opportunities for improvement and create a road map for success.
The actual coaching will only commence after the first family meeting. It consists of individual coaching sessions with the family leadership and periodical group meetings to optimize family alignment and measure success.
What is the ideal profile of a family business coach?
A professional family business coach should be sensitive to the turbulence of family emotions and skilled in clearing up potential landmines. He should have team coaching expertise and hands-on executive experience in the operations of family-owned businesses. Moreover, the coach must be trained in family and corporate governance and have an operational knowledge of corporate and family law and the legal structures that can help build a family dynasty.
Case study
The company founder and his three siblings are working in the family business. The three siblings are in discord about who should lead the company and make business decisions. The company board, consisting of the founder and the siblings, is ineffective. Furthermore, several of the founder's grandchildren made their inroads into the company without a clear job description and mutual agreement if they were qualified to work there. The struggle in the company also creates stress around the "family table."The founder understands that the company's future is at risk and, even worse, the family unity. He decides to engage a family governance specialist.
The specialist quickly grasps the toxic undercurrents in the family system. He concludes that he can only achieve a successful outcome of the assignment by contracting a family business coach to work with the individual family members. After six months of coaching and several family group sessions, the siblings are more aligned, sensitive, and empathetic to each other's perspectives.
The new insights and mutual understanding facilitated drafting of a well-grounded family protocol. The protocol defines who can work in the company and the qualifications required. It includes rules about business ownership and succession planning. The family protocol also provides for establishing a Family Fund to help finance future generations' professional development and entrepreneurial endeavors outside the family business.
The well-aligned protocol creates transparency and clarity for all family members. The family members also understand that a family is a living organism and needs ongoing nurturing.
At the same time, a sustainable corporate governance structure is put into place. It regulates board and management appointments, succession, dividend and investment policies, and other rules to create fairness, accountability, and responsibility.
The coach meets with the family group every semester to sustain success.
The family has recently undergone a successful generational transfer of the company's ownership and management. The family members recognize that their hard work in establishing clear governance rules resulting from the family business coaching process has been the defining factor for the smooth transition.