There are many proverbs to describe the challenges faced by family businesses in building wealth and leaving a lasting legacy. The Chinese say “wealth never survives three generations,” while the Italians say “from the stables to the stars and back to the stables.”
Their languages may vary, but the behavior offers a lot of parallelism. On a positive note, there is also a Chinese proverb stating that one has to govern his family as you would cook a small fish – very gently. And the saying highlights one thing…the need for leaders to focus on “people and intellectual assets.” We refer to these assets as talent within the family that can help preserve wealth and promote stewardship.
One good example that leaders must do is to eliminate next generation entitlement like not spoiling children who will be future successors of the business. The key is to teach them the value of money and encourage them to study hard and prepare themselves for future leadership roles.
All over the world, the story is the same: entrepreneurs start from nothing and build a business; their children maintain the business – and a wealthy lifestyle; their grandchildren grow up in affluence and lack the inclination to work and be responsible – and end up losing the business and the wealth. To quote family governance advocate Gale Petronis “in a family business, it’s the third generation that presents the big problems. The first generation founds the company and has the drive and the dedication to move it forward. The second generation rides that wave. The third generation wants to do their own thing. They’ve seen Broadway; they’ve had all the advantages.”
“Each generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.” This classic quote by George Orwell can apply in family businesses as well as life. But traditional family businesses make the mistake of focusing on a single family unit and neglect a very crucial transition to a multi-generational and extended family phase. What would happen if your family prepared a plan for the next four or five generations? Should it be better if you think way beyond your generation?
A couple of years ago, I initiated a plan for a family business based in Singapore where the patriarch at 72 specifically requested that I help the family craft a family plan spanning 30 years! The year after, a colleague based in Hong Kong requested me to collaborate with him in preparing a family growth plan covering 50 years! I admire remarkable leaders that think beyond their lifetimes!
There are specific tools and guidelines that family businesses can follow to help them succeed through generations and family business expert John Davis opines that the ‘secret sauce’ of long-term business success can’t be captured in numbers but through three main ingredients: Growth, Talent and Unity.
These ingredients are inextricably linked to enhancing human assets. Growing the wealth by focusing on family development refers to strengthening family functioning as a foundation for the preservation of family wealth. That way, each succeeding generation can become another “first generation” – bringing some form of survival instinct, creativity, dynamism, drive and maturity to the enterprise. I will end this article with a powerful quote from Ben Franklin, “the only thing more expensive than education is ignorance.”/WDJ