What鈥檚 driving the transformation of your family business?
Who is accountable? Have the risks been considered? How are you measuring your success?
Who is accountable?
Clear accountability for achieving results can be an important form of recognition in family businesses. And the importance of shared accountability for achieving a culture of continuous transformation can be the bedrock of many family businesses as the business and the family both evolve over time.
Business transformation 鈥� is it a potentially risky business?
Continuous transformation doesn鈥檛 come without risk. Clear visibility is needed of the internal and external risks that can affect the business, strategy or transformation model. An Enterprise Risk Management (ERM) assessment can be a key exercise to help address or eliminate the risks.
The need to re-recruit the family
For sustainable ownership and management, family members should remain excited about the business, especially younger generations with new skills and talents. It鈥檚 important not to lose sight of the family鈥檚 shared purpose, vision and values to continuously re-recruit family members.
Is change fatigue setting in?
With continuous transformation, there is the potential for 鈥渃hange fatigue鈥� and the amount of churn in the workforce is one indicator of waning energy. The key is to have good policies and procedures in place so when turnover occurs it isn鈥檛 too disruptive.
The unseen driver of financial performance
There is often a correlation between the financial performance and the involvement of an independent director. With formal board evaluations to assess the performance of the board as a whole, significant improvements have been seen in business performance.
How are you measuring success?
Family members鈥� roles and accountabilities may be blurred for the family and non-family employees. It is important to have everyone鈥檚 roles and responsibilities clearly defined and for employees to know how their performance is measured.
Sustaining a culture of continuous transformation in family business
The need to transform many companies 鈥� even entire industries 鈥� is the next stage in dealing with the impact of the pandemic. In the past, the need for change generally targeted a specific area of a company鈥檚 operations, such as restructuring the sales function or implementing a new performance management system. The far-reaching impact of the pandemic on businesses and society has changed that thinking.
The impetus for companies to transform their businesses in this new environment is taking the concept of change to a much higher level, which is being driven by the need to assess and potentially reinvent several aspects of businesses from top to bottom. Transformation is not a new idea in the world of family businesses, as heard in the recent 乐鱼（Leyu）体育官网 Private Enterprise roundtable discussions with senior family business leaders across the world.
The conversations with these leaders were candid and forward-looking. 乐鱼（Leyu）体育官网 Private Enterprise is pleased to be able to share these experiences and views on what has been described as a 鈥榗ulture of continuous transformation鈥� that is woven into the fabric of their businesses.
Family business leaders describe their role as the 鈥渄rivers of change鈥�, not the 鈥減assengers鈥�.
Beyond digital
The roundtable participants agreed that business transformation includes everything that is important to the family business and the business family which includes 鈥� but is not solely focused on 鈥� its technology and operating systems. They emphasized the importance of distinguishing digital transformation as an enabler of change from the broad transformation that might be required across most of the business itself.
Sustainability and the environmental, social and corporate governance (ESG) agendas of the family business and the business family are also becoming new driving forces behind the need to transform the business. They recognize that ESG links back to the shared purpose of the family and the culture of the business. It also helps drives the choices that customers make, strives to ensure the supply chain is ethical, and makes it a priority to collect and report accurate data that gauges the impact of their actions.
I think of business transformation as a spectrum. A lot of family businesses sorted out their back offices during the pandemic to save costs and manage their liquidity. As the pandemic wore on, it became evident that online trading was getting bigger and they had to respond to what customers were demanding. That is now evolving and influencing customer choice, including how customers respond to the companies they deal with, based on their ESG strategies and impact. I believe we鈥檙e seeing a shift toward the front office now because many family businesses would say that they took care of the back end to manage their liquidity during the crisis, and it鈥檚 the customer-facing strategies, their ESG agenda and the potential for revisiting their shared purpose that they need to come to grips with.
Digital transformation and business transformation are not synonymous. Technology can enable change, but alone it is unlikely to transform the business.
Who should be accountable for continuously transforming your business?
In a typical corporate setting, roles and responsibilities are narrowly defined and accountabilities are prescribed. Employees have titles, role descriptions and they work within the scope of those roles.
In family businesses that are more fluid, family members might take on multiple roles, and they鈥檒l often lend an extra helping hand wherever and whenever it鈥檚 needed. With a more flexible structure compared to corporate enterprises, they are also often known to change and evolve with the entry of next-gen family members who bring new skills and expertise to the table.
In family businesses, the family鈥檚 identification with the business and their shared values also generates an added layer of personal accountability. As one family business leader described, 鈥淭he family is the business, and the business is the family. When things aren鈥檛 going well in a family, you can鈥檛 just throw up your hands and walk away. The same is true for the family business.鈥�
However, there are concerns among some family business leaders that if a family is running the business and owning it, they are essentially reporting to themselves. Could this lead to potential problems if they aren鈥檛 answerable to someone who has an objective perspective and holds them to account by asking the right questions?
The roundtable participants expressed an interest in introducing more formal accountability for business results 鈥� such as external independent directors on the company board or on advisory boards that typically don鈥檛 have voting authority or control, but do have the ability to hold management to account.
In a culture of continuous transformation, someone should be accountable for making sure that there鈥檚 the drive, pressure, energy and dedication to understanding what鈥檚 really happening in the business, what the future prospects look like and in taking action. That person should sit at 鈥� or have direct access to 鈥� the decision-making table.
These and many other practical insights from family business leaders and 乐鱼（Leyu）体育官网 Private Enterprise professionals across the world can be one of the guides for sustaining a culture of continuous transformation. You are encouraged to download the full article if you鈥檙e interested in learning more about how to relaunch, recalibrate and renew your family business.
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Klaus Rytz
Chair of the Board and Partner
乐鱼（Leyu）体育官网 in Denmark
