Types of Family Businesses 3: Uniteds?
We are continuing with our unpacking the issue of the various types of family and family businesses combinations and their leadership dynamics. As you may have seen in family business, a lot of different problems can affect the growth of the family business, and most importantly the continuity and survival of the business falls into understanding the pertinent as much as the underlying issues of the family that owns and controls the business. Before we talk about the structuring of ownership of the business, let us explore the leadership of the family business.
For the intents of this series of articles, we are going to use available data and study from counterparts in the Family Business Services industry globally to form a picture of some challenges that face African Family Businesses. One such study is that done over several years on 21 German wine-business families by Sabine Rau, Partner at Peter May Family Business Consulting. Sabine and her team found that Family and Family business combinations could be categorized into four basic types – "James Bond," "Eternus," "United," and "Steward." What they identified as unique about each type of family combination is that each makes different decisions, raises its next-generation differently, and ultimately engages in different succession processes bringing about unique outcomes. Understanding the four different types may help develop a next-generation leader and ensure the continuity of your family business. And further examinations of these types and exploring the African Family Businesses further may help us identify and grow our businesses better.
I'm going to take the four different types of families and explore them in the context of our African landscape and see if we can identify these unique families within our communities and possibly in ourselves as family business owners.
We have to date explored the James Bond type family and the Eternus type family. In both cases, we have identified the pros and cons of the families and some possible resolutions on taking this family into a Multi-generational wealth organization. The James Bond and Eternus types have proven to be very similar in many ways. And to some extent are typical family models in developing world situations like Africa, where a lot of focus is on the founder and their success and a little less so on the continuity of the business past the founder stage. Let's now look into the third family business type we want to unpack:
The United-Type Family
United is defined in the dictionary as: joined together, for a common purpose, or by common feelings. Similarly, like Eternus, United-type families integrate the family into the business, but unlike Eternus and James Bond, United is not an authoritarian patriarch. S/he is an authoritative leader focused on developing next-generation talent; s/he asks for family input and nurtures the family's interest and involvement in the business. The next generation is involved in the business and willingly comply with expectations in the hope of taking on more important roles over time. By actively encouraging and involving the next generation, Uniteds often achieve a successful succession. They nurture one or more competent and committed next-generation member(s) who engage in entrepreneurial projects with the leader prior to succession. While United seems to be a winning type, a more detailed look reveals some fine cracks that could be prevented, or at least managed, with the help of a trusted advisor.
In selecting a competent next generation member, United rejects other (competent) family candidates, which can cause them to exit the business and take their valuable human capital with them.
The united-type families are those who have seemingly evolved from the James Bond and Eternus family types. They are conscious of the evolving world of both family and business. They, therefore, want to integrate the family and business into a functional working model with the correct structuring and governance, which will take it forward into the future. Although power is ultimately in the hands of the founder or patriarch/matriarch, they are focused on continuity of both family and business, and their decisions and actions seem to be focused on this task at hand.
What this would look like is the family being made aware of the function of the business and, ultimately, their role as custodians of the business and the family as a part of the business. The next generation is involved in the business and tasked with roles that put them in positions that they feel will bring success to the family as a whole while taking the business forward. For example, if Ms. Simbajena or Mr. Mbanje as business owners started nurturing their children's education and experiences from a younger age, they would have the opportunity to hear the voices of the "Next Generation" and their ambitions for the business or outside the business. They would also have the chance to see the talents available in the Next Generation, which would help take the business forward. This, in turn, would prove financially rewarding to all members of the family if the business succeeds and makes money, that means the family as shareholders benefit from this success financially. In most cases, United Family types are probably not headed by the founder of the business but a 3rd generation.
Let's have a quick look at the Pros and cons of our United family type on a table format for clarity:
As stated by the report, although seemingly perfect, United-types have their challenges. The potential sidelining of individuals that could make suitable successors. The integration of family and business has its flaws. Personal differences emitting from character differences or conflicts may result in successors ideal for the top jobs being sidelined or ignored. It then becomes integral that a structure be put in place that helps the United-type family navigate and continue to achieve successful succession.
A trusted advisor can help United-type leaders develop a succession process that chooses a successor without alienating other candidates. Alternatively, an advisor might help the Uniteds find a way to structure the business so that a duo of competent and motivated siblings can assume succession as a team.