It is a moment that stays with me as a vivid reminder of the scale of family ownership across the globe.
I was Head of the World Economic Forum Family Business Community and was running an event bringing together business-owners from around the world to share their experiences and challenges.
As I looked around the room, I realised that those present, of all ages, representing businesses from many different countries, between them controlled companies generating over $650bn in revenue and employing around two million people.
As the world struggles to manage the consequences of the Covid-19 crisis, the growth and prosperity of these family-owned and family-controlled companies will have a huge impact on the quality and speed of our economic recovery and future employment.
A catalyst for change
There is a growing expectation that all companies take greater responsibility for pressing social and economic issues such as wealth disparity or the overuse of the earth’s resources. The fact that a limited number of large shareholders control these family businesses makes this group in particular a powerful catalyst for change as these owners are the ones who will ultimately determine – or should determine – these companies’ values, purpose, and long-term focus.
Ownership should be a calling, an active profession, not solely a source of income.
When you are the owner of a large business, wherever you sit in the company constellation – CEO, board member or shareholder – I have come to believe that ownership should be a calling, an active profession, not solely a source of income. In recent years, I have found that most business families I meet have recognised this power and are willing to exercise strong leadership and influence over their companies. But some have struggled to execute their vision or have not known where to start.
Based on my work and the many conversations I have been privileged to have with some of the largest business-owning families across the globe, I have set out three key priorities which I believe these owners should focus on if they want to lead the way in the post-pandemic recovery and contribute to building a cleaner, more inclusive economy:
1. Agility: Don’t fall in love with your past
An owner’s first responsibility is towards the long-term sustainability of their business and their employees. Many families I have met are shareholders in centenarian companies and proud to recall how their firm survived through war, social unrest, or economic crisis. They like to think of themselves as resilient and agile, whilst still venerating traditional pillars of ownership including their family values and long-term orientation.
Today, this resilience is being tested in new ways. The pandemic has demonstrated the need for agile decision-making as corporations have had to respond quickly to rapidly evolving information. But planning for the post-Covid era will mean many family businesses have to make a broader assessment of their company or industry’s vulnerability to disruption and reflect more deeply on how to adapt to a fast-changing context while upholding family legacy.
These questions urgently need to become central to conversations in both the boardroom and at the family dinner table.
More than ever, family owners need to ask questions including: “Are we fostering an entrepreneurial spirit among successive generations?”, “How do we use our family assets to drive innovation and make intelligent investments in burgeoning industries?”, “How do we balance the need for growth and innovation with our need for income?” or “How do we attract, develop and incentivise a pool of world-class talent?”
These questions urgently need to become central to conversations in both the boardroom and at the family dinner table. Being agile, for an owner, means cultivating deep curiosity about how the world is changing. In my current role as Executive in Residence with the Ownership Project here in Oxford, it is clear to me that owners need to understand that the transition towards global sustainability will be an important part of this change.
2. Responsibility: How you make your money matters
As long-term thinkers, owners should understand that building a more sustainable economy is not just the right thing, but also the smart thing to do. Strategically minded business owners recognise that companies which lag behind on social responsibility will likely find themselves increasingly alienated from a new generation of employees and customers. They also grasp that regulatory pressures are likely only to increase.
But achieving a marriage between sustainability and strong financial returns will require strong leadership and discipline from owners. For many families, this will represent a long and demanding process. But it is also a once-in-a-generation opportunity to continue building their legacy into something family members can be proud of.
In this context, embracing a few environmental, social and governance (ESG) activities as window dressing will not be sufficient. Instead, family-owned companies need to seek a robust understanding of current global challenges and then respond to this information in a meaningful way by supporting the integration of sustainability directly into their key business decisions.
It is essential to ensure that this perspective – as well as the ethos and courage to model change – is represented at board level. The board of one family company embraced a “carrot and stick” approach: they tied top management’s bonuses to performance indicators linked to a number of United Nations Sustainable Development Goals (SDGs). At the same time, the company implemented a change process to educate, empower, and galvanise staff around a common vision, ensuring that the company’s approach to responsibility was understood and owned by everyone. Employees were asked to select four SDGs against which to benchmark the company’s activity on a yearly basis and to identify actions linked to these. This kind of approach requires exactly the leadership and willingness to take risk that a long-term family shareholder should be able to provide.
3. Family: Make ownership a strength not a liability
Many of the families I have worked with have a complex family platform charaterised by dozens or even hundreds of family members, substantial operating businesses, an active approach to philanthropic giving, and significant investment portfolios. This “family ecosystem” can be either an asset or a liability.
Owners have a potentially transformative role to play, as guardians of ethics, values and good conduct.
In times of disruption, owners need to signal stability and show the human face of leadership: family shareholders at such times should speak with one voice, and communicate their commitment to their business early and often. Employees and suppliers will be looking for guidance and should find reassurance in the knowledge there is long-term ownership with a strong sense of purpose, solid governance mechanisms and shared values at the highest level.
To lead in this way, families need to prioritise often neglected questions such as: “What is our purpose, and how can it be articulated to our different stakeholders?”, “Where do we want to be in ten years as a company and as a family?”, “Do we have a succession plan and governance framework that guide family interactions?”, “How do we handle a growing number of family shareholders with diverse views?”, or “How do we deal with clashes between active and non-active owners?”
Owners have a potentially transformative role to play, as guardians of ethics, values and good conduct. In this time of crisis, one family has recently chosen to organise dynamic quarterly events for newcomers, sharing the history and vision of the family and company and emphasising the importance the family attaches to responsibility. Other families have gone the extra mile to organise support for their employees’ mental health while working from home, including hotlines and regular check-ins for support.
A chance to lead the way
Ownership can be a wonderful job: By pursuing it with passion, dedication and discipline, and by reconnecting with - and aligning around - deeply held family values and a long-standing commitment to employees and communities, business-owning families have the potential to become inspiring stewards and a phenomenal collective force to rebuild a fairer and more sustainable economy.
From my conversations with business owners, I know many understand this. “Change must come from the top” one told me recently. Another summed it up well: “Nothing comes close to the family company model in terms of business sustainability … if done right.”
Business-owning families, with the power of their concentrated ownership, now have a unique chance to lead the way through these times of crisis.