Assessing the Long-term Viability and Sustainability of Family-led Businesses
Lokesh Nigam
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Entrepreneurs and families running businesses uniformly highlight bandwidth management and family governance as a key driver to long-term sustainable growth. Since family-led businesses need to leverage their time and resources on key aspects of the strategy and long-term viability, it is crucial for businesses to:
1 Align strategy, leadership and organizational resource management for sustainable growth
2 Lead organizational growth by enhancing the bandwidth of senior leadership and family. Induct the right people in the right roles with right competence across the organization
3 Establish robust family governance processes that ensure induction of right family talent, based on business needs. The board of directors must proactively establish regulatory and legal compliance. This will also ensure that they remain globally competitive and are able to maximize shareholder value
4 Ensure a systematic program for induction of family members, imbibing family values for sustaining longevity of the enterprise purpose
It is imperative for organizations to evolve continuously in the ambiguous and volatile market. While in the last century, transformation challenges presented themselves over two generations, today's marketplace is evidently different. The volatility, ambiguity and complexity of the economic forces drive multiple transformations within the one generation itself, which have a direct impact on growth and longevity. Entrepreneurs and family-led businesses therefore, continuously need to fight a battle on three fronts
1. Sustainability in the competing and volatile market place. Sustaining with the products and services in the current market place by best-in-class processes and systems which lead to uniform customer experience
2. Renewing a focus on next generation products and services in the organization, which would ensure enterprise viability in the future
3. Being agile Despite the best sustain and renew strategies there are always forces that bring novelty and newness in any product and service across markets, economies and the globe
After analyzing more than 100 family-led businesses in the last three years, we have found that in order to work with these challenges, entrepreneurs need to free their bandwidth and focus on renewingtheir strategies for the future and being agile in order to respond to the change in market forces. Therefore, they need to develop second line talent that is responsible for strategy implementation and is completely accountable for strategies related to
sustainability. As most of the promoters in the industry have to focus on direct operational issues, their bandwidth to manage growth-led strategies focuses only on expansion, rather than also focusing on overall capability enhancement strategies that ensure longevity and sustainability of the organization.Organizations remain successful over a short cycle with products and services relevant to the market place but lose out over 10-15 years as better products and services replace them in the market. This is a dilemma all family-led businesses struggle with. Therefore, the earlier promoters make themselves irrelevant to operations, the better it is for the organization.
So what do family-led organizations do to ensure long-term viability and sustainability? While there are multiple ways of managing enterprises, enterprises need to manage their transitions well.
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