Survival rates for family business are a genuine cause for concern. Although a thriving family business sector could form the backbone of an economy, it is generally acknowledged across the globe that family firms have a life cycle limited to three generations, and during the third phase they are expected to fail.
Through a variety of studies and interventions, longitudinal research (Hallmarks) since the early Nineties, and more recent studies conducted in Asia and Europe, ICE has thoroughly investigated the dynamics of the family business structure. Most recently we have had the opportunity to apply this learning to provide insights into enterprise and entrepreneurship in China, with a specific focus on family business sustainability and succession.
Equipping the next generation
A multi-lateral approach is required if we are to improve survival rates of family firms, including the need to educate the business support sector in the dynamics of family business, which can be significantly different to those in non-family firms, and to raise the profile of family business in enterprise policy. These capacity building priorities relate to external stakeholders, and are critical to the future of enterprise and associated economic development.
Through this post, however, we turn to the need to capacity-build the firms themselves, and in particular the need to future-proof family businesses by equipping future generations with the skills to become enterprising wealth-creators of the future.
This Century belongs to those who have ideas, see change as an opportunity and are prepared to make things happen, so we need to nurture enterprise talent in our children. We can do this by providing the right environment, one which is lively & dynamic, in which they can learn both at school and at home. This is crucial to creating future generations of entrepreneurial citizens as well as future entrepreneurs.
As well as nurturing entrepreneurship in all children, a vital element will be the effort we put into specifically encouraging and nurturing the children of family businesses.
Often, these children show little or no interest in the business as a career opportunity, with their interest being orientated more to consuming the wealth that has been created than continuing in their parents’ and grandparents’ footsteps. This dynamic presents a huge risk to the sustainability of family businesses which make significant contributions to the wealth of our economy.
The practical experience, connectedness and deep tacit knowledge built up over years to create sustainable enterprises is a priceless economic asset which we cannot afford to squander. On a social level too, the potential of our children to be good citizens will more likely be nurtured as wealth creators, with all the responsibilities which that entails, than by casual consumerism.
3 ways to help family businesses to respond the challenge
Through our experience of working both with family-owned business and those providing support to the family business sector, ICE has concluded that a multi-faceted approach is needed to help the family business sector to respond to this socio economic risk. It should involve both parents and children, proving both with the attitudes and the skills required to succeed.
Here are 3 ways to help family businesses to respond to this challenge:
1. Stimulate enterprising behaviours in children
Transform the aspirations and skills of children and young people, by encouraging them to recognise the concept of enterprise as a creative pursuit, and as a legitimate and engaging vehicle for learning and developing the skills and qualities they need to face the future with confidence and enthusiasm. Children learn to solve problems, develop their interests and conjure new ideas almost instinctively. By inspiring them to do so in the context of enterprise they, and their parents, can be confident that whatever unexpected turns the world takes in future they will be amongst those best equipped to succeed.
2. Help parents and teachers to be enterprising, and to take action
Parents and other key intermediaries (teachers and trainers) should learn how to nurture talent and the potential in all of us to be enterprising. By adopting an enterprising attitude themselves they can they pass on the ability and confidence to succeed to their children. Then, we mustn’t stop there. Parents need to be motivated and supported to take immediate action to maximise the enterprise potential in themselves and their children once they have acquired the skills; this can be achieved through being helped to develop a practical action plan of how to work with their child and, most importantly, to celebrate success.
3. Transform the business to be fit for a new generation
Assist those that are directly involved in family businesses – parents and their children – to transform the business through embracing and exploiting new opportunities within the global economy.
This approach will not only serve to revitalise existing businesses and therefore improve their prospects; it will also improve the engagement of children through increasing their involvement in business activity and potentially making use of their more current knowledge and skills.
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