Date posted: December 1, 2016

To successfully lead a family business you need a system that results in decisiveness and unity. Why? Because if your leadership roles are poorly designed and badly structured, you set your family business up for failure. 

How to design, structure and allocate leadership roles

It makes no difference whether you adopt the one-leader model for your own family enterprise or whether you create a team of leaders, the fact is leadership still requires good structure. To help ensure a healthy long-term business performance, your family business needs decisiveness and unity. This begins with the recognition that, for any company or organisation to be successful, it needs to be led, managed, and governed well.

How to lead, manage and govern well

Good governance can give your business a sense of purpose and stability. Without this, it is impossible to plan for the business’s long-term performance. The very nature of a family business means that it has a sustainable advantage over other kinds of businesses, mainly due to the long-term goals, plans and commitments of the family. If there is no stability within the business, however, that advantage falls by the wayside.

The family business has to be governed well for success

Good governance also helps preserve the purpose and unity of the family business. It allows for plans to be made, any problems solved, important issues addressed, leaders chosen and developed, and disputes settled whilst adhering to a shared vision and mutual values.

To achieve the above, you need:

  • Useful roles
  • Policies
  • Agreements
  • Plans
  • Forums (boards, family councils, annual meetings of the owners)
  • To govern well in a one-leader system, you most likely still need key stakeholders to join together as:
  • A shareholders’ council that serves the governance needs of the owners
  • A board of directors that serves the governance needs of both the business and the owners
  • A family council that will help provide governance for the family

To function well, each of these groups will require good leaders. Plus an ultimate leader. The deputy leaders will lead different parts of the business system in close association with the ultimate leader.

Leading is different from managing

Leading a family business is fundamentally about identifying where the family business needs to go, working out how to get there, and then motivating your family members and other stakeholders and employees to make whatever necessary changes to get there.

As a leader, you have to know how to connect, and you have to be convincing. Followers need compelling reasons to stay with you for the long-term, and to support you during difficult times. As the saying goes, you lead people into battle, you don’t manage them into battle.

As an effective leader, you might be charismatic or have a more quiet approach. Typically, however, you will have strong ideas and principles about how your family business should be run, what your co-owners should invest in, and how your family should behave. You also want to do the best for your followers and to treat your partners fairly. In many ways, you are the servant of the greater good, doing whatever is necessary to protect the standards and aspirations of the business and the family behind it.

Managing is about getting people to operate efficiently and effectively

It is achieved by planning and budgeting, organising, analysing problems, creating and using management systems, allocating resources, and providing performance feedback.

Managing is the perfect complement to leading

Much of a family business’s success (or any business, for that matter) has to do with getting jobs done well, on time, and on budget.

Invariably, family business leaders are also strong managers. The challenge is to not focus so much on management that your family business ends up over-managed, under-led, and under-governed. Too much focus on the business’s operating effectiveness generally means you’re giving insufficient attention to the leadership and governance needs of the organisation.

Manage better by:

  • Setting clearer goals and by controlling spending better
  • Devoting more attention to the development of the next generation
  • Giving performance feedback to members

In the governance area:

  • Make sure everyone is clear about the family’s mission or core values and that there are adequate rules and policies to guide behaviour
  • Develop a forum and process to discuss important issues and mediate differences among family members fairly

In leadership:

  • Have a clear vision for the future
  • Recognise the need to change in order to adapt to the environment
  • Be inspired and inspiring so that you can tackle important challenges

Governance, leadership, and management: family businesses need all three of these activities and, as an effective leader of a family business system, you must engage in all three of these activities.

How much time you spend on each activity depends on your leadership style and the circumstances. You may prefer to lead and let others manage. Or you might opt to spend more time governing the system. Know where your strengths lie and call upon others to fill the other roles.

This article has been provided by KPMG and the advice is designed to be general in nature.