Professionalizing Family Business

By: Maria Chonita Rivera - Cejas, MM

Collaborating Consultant

Premier Family Business Consulting Inc.

What’s in the game? Stepping up with trendy fame, owners of family businesses are now peeping (chirping) up to what the more successful ones are engaged in an improved model of running the business by so-called rational, orderly, well-trained professionals. A family business, as the Wikipedia winds it, is an organization engaging in commerce and greatly influenced by multiple generations of a family – related either by blood, marriage or adoption. The family members owning or leading the business organization are engaged in influencing the business vision, and have the passion and drive to pursue the business goals. A multi-generation family with various types of family affiliations may create unique dynamics and relationships; to some extent forming some quirky cultures that comes too challenging to run. A professional is described as an expert, qualified and proficient, well-trained, well-practiced. They can be heroes in the family business; at least they may risk and slide down as willing hatchet men or unwilling rubber stamps in the midst of family clashes or chaos. Professionalizing Family Businesses may present categorically two contrasting perspectives. By ‘profession’ it implies objectivity, logic and rationality; while as a family always convey some amount of ‘subjectivity’. It guarantees generally some private preferences, intimate looseness, peculiar whims acceptable in a homely acceptable environment. As they say, no matter what – a family is a place where you can let your hair down. No staid and strict sentences, no serious decrees but a tender loving, caring, support group at the beck and call. So then how can we put more objectivity in a domain full of subjectivity? Albeit, impersonalizing the personal world of family? The answer for me and as I would like to embrace the treatise on the professionalization of Family Business is to create a working balance likened to an intertwined multiple strands, or at least two streaks of rope. One strip can be bulky while the other may be vary but they are entangled, and team-bonded. And among the many alternatives and various names that HR rebranding process has adopted, may I take that Creative Balance, is a conscientious consequence of doing HR Chemistry and HR Architecture where an HR practitioner and the likes, creatively blend the strengths of particular people and design a structure of the organization that propels them to be productive and progressive.

Professionalizing the Family Business Owners?

Often said, the leaders in the organization define the culture of the organization. Leadership as demonstrated in how they think, and act; plan, lead, organize and control the resources of the organization. It’s got to do with personality styles, character traits, attitudes, beliefs, etc; some general tendencies can be abated. To drive business and to make it deliver the desired results, the driver ought to have the right competencies needed, the favorable character, and a purposive commitment to deliver the big business dream. Family members working in the business are not necessarily to be outsmarted; but they can be trained and developed further in the areas they can align with business directions; they can attain skill sets needed to run the cog of the business wheel. They should be willing to accept and recognize the talent or some professional advisor they need to complete their team and learn to grow and show maturity with the business.

Peebles on the Pathways.

While on the road, family members may meet obstacles as a result of influx of talents bringing their set of experiences and the additional trail of documents required in the standard procedural train, for the sake of so-called professionalization. At times, too much rationality without sensibility could derail and circumvent business directions so that it can lose track of the family's uniqueness and distinctiveness; what is the special sauce that made their family business succeed to start with? For example, in a company where the old man and founder personally greets the workers as he takes the morning plant tours and stands by the big exit door saying ‘Thank you’ as workers line up after the day’s work. There comes a new Employee Relations Manager who prefers to organize employee parties and town hall meetings and the like. There is nothing wrong with these employee engagement tools, until we realize and reflect, what do employees themselves really prefer? What about a company that instituted visits to respective employees' family homes, while it is a gesture of generosity, an altruistic show of caring; employees may not just be comfortable about the seeming intrusion. Establishing a process without really knowing the root cause to be addressed and the ultimate purpose the process is made for, notwithstanding some old reliable systems and the old ways of working, may derail efforts to professionalization. What if some old ways are the major success ingredient to the family-owned enterprise? Family members grow necessarily from first generation to fourth or fifth generation; some are worldly lucky to reach 100 years in the business. Children may have different perspectives and choose to embark on a different path while others are peeled on making both ends meet to sustain the family business. This even calls for more understanding, consensus decision-making on how a family business organization is designed, respectively.

Practice Areas of Family Business Professionalization

There are ways to put it right as suggested by Vikram Bhalla and Christian Orgmeister, as I would like to reiterate here the four steps as follows;

1. Definition of Family’s Role. First things first, it is essential that family members agree on the need to professionalize and set clear the big dreams and visions of the company’s future. They articulate the company’s distinctiveness and align the elements of that special uniqueness to endure competitive edge and sustainability. Some family members in the retail industry for instance may have a gut for determining the location of new stores, the right location, that is for business expansion. Valuable skills as these should not be lost in the maze of getting the business professionalized. The company should be able to identify the skills of the seniors and maximize its best use. The younger generation may increase involvement through new roles, business expansion, new products, new technology in ways aligned to their strengths and interests. Role identification is core.
   

2. Strengthen Governance. This is addressed all in four levels – the family, the board of directors, the corporate center, and the executive management committee. Professional employees can be insulated from family disagreements through formation of family assemblies for general issues and family council for pertinent issues relative to decision making and roles in family business.
   

3. Setting up the Board. In most respects, inviting a non-family board member can present fresh perspectives; nonetheless, if there is none it is still imperative to define the board’s role with respect to family members, the business itself, networking and external relations.
   

4. Organizing the Corporate Center. Levelling up governance is the establishment of a holding company serving as the driver or the central gatekeeper to deliver shared service support and align synergies across business conglomerates. Organizing the Executive Committee to focus on family business strategy and family issues, not quite delving on tactical issues. Strengthening the Company and addressing the elements that trigger high performance. Build and equip the leadership team, determine the composition and manage expectations, plan management transitions, establish management information systems, scale performance measures. The organization structure should be delineated and communicated further down the line. It should support immediate company’s directions while reflecting company culture and history.
   

5. Defining the Company Way. The vision, mission and values should be integrated and institutionalized by describing behaviors that reveal professionalism in leadership and management. Story-telling of the founder’s success can reinforce the communication process. Articulation of the do’s and don’ts ease up some practice areas in professionalization.

Parting Pieces of Professionalization: Storyline

During the AFEEC in June 2021 organized by Premier Family Business Consulting, members of the family business, 3rd generation family leaders – Ken and Bani; and the Chairwoman herself, Shanti shared passionately their journey of PT Samudera Indonesia TBK Ambassador’s Circle, FBN Asia. The founders agreed to establish a policy to learn about Family Governance, embrace it and institute codes of disciplines among them. They went further by establishing policies to apply for their families, i.e. prioritizing children’s education in big universities, not necessarily nailing their noses to the family business and allowing them to take professional experiences from other external companies. Children are educated on governance, family ownership and professional management. Their patriarch before his death facilitated the establishment of a holding company and transferred his ownership to his 3 daughters, Shanti as one of them. The second gen has to balance both being owners and working professionals and are cautious in relating with professional managers involved in the business, as their work routine would call them to exercise different hats within the day – as a family owner, as a manager and a professional co working with other professionals employed in the business. They went through a transformation timeline while holding on to the business nutshell until the 3rd generation is ready to pick up. Ken and Bani shared about delineating perspectives of being professionals as they were hired as professionals and had to prove their worth to be able to climb the corporate ladder. They also run to a family office where they can exercise their ownership perspectives. As we speak, the 3rd gen is now set preparing the next gen, involving their cousins to learn the professional ropes as they are moving up to full ownership perspective, and the transformation goes on. Other success stories are out there, Filipino family businesses are on the rise. Staying in the game and sustaining wins of the game is a clarion call for family businesses to professionalize. Navigating through phases of turbulence may require patience, perseverance and planning. As an adage puts it, ‘set the sails, don’t get lost in the true North’. Nonetheless, family business should not lose sight of that unique specialty that brought business success. Setting up creative balance in the businesses, I.e., strengthening the family institutions and by creating high performance business enterprises to last for the next generations.

This article first appeared at the Premiere Family Business website. You may access the original source through this link.