Peter Englisch, Global Family Business and EMEA Entrepreneurial and Private Business Leader, Partner, PwC Germany, and Francesca Ambrosini, Family Business Clients Programmes Lead, PwC United Kingdom
Family business leaders around the globe have faced a year of unprecedented upheaval. Confronted with the challenges connected to the COVID-19 pandemic, they have had to make difficult, often dramatic decisions that impact livelihoods, business models and family legacies. The year’s uncertainty has triggered a fundamental shift in how business is conducted and called leadership and governance into question.
But how will this all impact your priorities as a family business leader? What will be expected of you in the years to come?
In reality, the COVID-19 crisis has merely accelerated both the impact and the urgency of addressing the megatrends that were already straining traditional business models. Increasing wealth disparity, technological disruption, shifting age demographics, jingoistic-driven polarisation and declining confidence in the institutions that make up society’s underpinnings will continue to colour the perspective of family business leaders.
Moreover, there is pressure on every business to reconfigure and reorganise if they are to stay viable in the immediate and foreseeable future. This might mean dramatic operational transformations for family firms with very traditional business models, but regardless of size or sector, there is a tangible sense that all family businesses need to in a sense renew their ‘licence to operate’ if they are to thrive in the years ahead.
Here are five actions that should be on your family business leadership agenda for 2021 and beyond:
1. Redefine the Role of Tradition
You might think a family business’s attachment to traditions would impede its ability to stay flexible, nimble and agile enough to respond quickly in an era of significantly changing marketplaces and environmental realities. However, family business leaders can foster diversification and innovation by defining their legacy through giving rein to an entrepreneurial spirit rather than remaining in a specific line of business.
An entrepreneurial spirit formed the bedrock of your family business’s founding and it contributes to its future prosperity. It will allow you to tap into a tradition of resiliency and adaptation that will safeguard your legacy in the face of an uncertain future. Remember that tradition only becomes a trap when its concept becomes synonymous with rigidity.
2. Capitalise on Governance for Change
Typically, family businesses function through governance layers that can span generations of family members, involving executive management, family councils and shareholder constructs. Family business leaders should take steps to align these governance bodies, cultivating a shared direction and vision based on family values and purpose.
By creating, improving and maintaining robust communication channels, you can implement the kind of change that will ultimately benefit your organisation while providing reassurance to stakeholders.
Executing change through governance effectively means taking steps to ensure all shareholders understand the evolving challenges and trends influenced by global issues, such as the Sustainable Development Goals and climate change.
3. Leverage Technology Where It’s Required
Technology offers a platform to connect and build relationships that are important during all business cycles but will be particularly helpful for navigating the years ahead. As such, family business leaders must also develop their personal understanding of technology and how it will impact the workplace in the future. Machine learning, AI and digitalisation are no longer challenging the norm; they have become the norm.
However, it’s not enough to deploy current technologies in your working environments. Family business leaders must fully grasp the implications that will accompany the technology just over the horizon. Developing tech-savviness, and an understanding of the relationship between technology and people, is key to future-proofing your organisation.
4. Understand Leadership Responsibilities
At the top of your family business leadership responsibilities are how to engage and communicate with employees and others who are dependent on you and your decisions. Organisations that try to mitigate a crisis at the expense of their workforce, such as making quick decisions about staff numbers, often experience long-term cost because of short-term thinking. By prioritising your people, while also balancing the needs of the business and stakeholder partners, the family business will be able to navigate the changes ahead.
Second, integrity and responsibility are characteristics expected of the world’s business leaders. A notable 65 per cent of respondents to the 2020 Edelman Trust Barometer survey felt that CEOs should take the lead on addressing the pandemic rather than waiting for governmental intervention. This is because businesses are trusted.
This means it’s important to be clear on questions about your organisation’s social and environmental impact, and the answers should be used to guide strategy and build an identity. Too often, it can be convenient for family businesses to leave social responsibility to their larger non-family-owned counterparts, but making the world a better place for its inhabitants has always been part of the family business narrative. Family businesses must not lose sight of their societal and environmental goals, even during a crisis.
5. Recognise the Importance of Empathy
From making charitable donations, refocusing operations on producing hand sanitiser and PPE, to taking extraordinary steps to ensure the safety of their teams, remarkable leaders have emerged through their empathic responses to the COVID-19 pandemic. With a growing perception among many that inequality undermines confidence in the world’s institutions, and that capitalism, as it exists today, does more harm than good, the need for family business leaders who use empathy and compassion to inform their actions has never been more vital.
Empathy can deepen your relationships with customers, partners and employees, leading to increased sales, loyalty, referrals or competitive advantage. Moreover, building a culture of empathy within a family business has been shown to generate higher morale among employees and promote better talent retention. This involves recognising everyone’s needs, regardless of their role in your business or personal relationship with you, which is the mark of a true family business leader.
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