4 Key Management Lessons You Can Learn From Family Businesses
Succession shows ruthless politics, backstabbing, and other intrigue that goes on behind the closed doors of a fictional family-run company. Fortunately, despite its sharp writing and superb acting, the hit HBO series bears almost no resemblance to how most real-life family businesses are run.
In fact, family businesses have a lot of useful lessons for all types of companies. Here are four you won’t see on screen.
1. Prepare the company to pass on to future generations
Even if they’ve gone through several generations of ownership, family-owned firms typically remain closely associated with the family name and history and retain something of a founder’s mentality. That’s certainly the case on Succession, where Waystar, despite evolving into a massive international conglomerate, in many ways still reflects founder Logan Roy’s persona.
On the show, unfortunately, the result is a litany of dirty deals and chaotic managerial moves. But for well-run family businesses, this mindset encourages a focus on the firm’s values, purpose, and long-term performance over short-term profits. Current leaders often see themselves as stewards who have a duty to future generations.
Many family-owned companies have codified this idea with guiding principles for future generations to ensure stability. In some companies, these can become binding rules. For example, one founder of a successful enterprise we’ve worked with wrote a letter to his children saying: "You do not own the company. The company belongs to its employees, its customers, and its shareholders... in that order." The children signed away their right to sell their shares outside the family for 50 years.
Family leaders also are more conscious of the need to plan leadership succession, often with a view 20 or 30 years into the future. Most founders understand the benefit of looking out for younger talent and preparing them for future roles. Almost all family businesses have highly developed and well-resourced programs to identify and develop future leaders from within. That’s worth emulating even if the talent pool doesn’t include any of your relatives.
2. Forge deeper, less-transactional relationships
In family businesses, relationships between employees are more emotional than those in other companies, as many colleagues are extended family members. As a result, the company’s value proposition to employees can include a more supportive culture with a greater focus on values. You may not be able to replicate family dynamics completely, but they can serve as the goal for how your employees treat each other.
According to a 2022 study by the French Institute of Family-Owned Businesses, 97 percent of managers say their attachment to family businesses is supported by communication about strong values, such as mutual trust (86 percent) and relationships with colleagues (77 percent).
3. Develop a purpose
Many companies focus overwhelmingly on investor demands and prioritize short-term financial performance. In contrast, family owners are more likely to have a “higher” purpose. Leaders often have emotional ties to a founder and their vision, encouraging them to maintain a stable, long-term strategy. Similarly, establishing and sticking to a well-defined mission and values can generate strong engagement among employees and become one of your company’s greatest assets.
4. Introduce professional governance and management systems
For some management issues, family businesses can also provide lessons on what not to do. Family companies typically start with the founder in the role of CEO, chair, or both. The board or executive committee -- if they formally exist -- tends to follow the lead of the founder, and decisions can be made informally. But over time there may be multiple voices, generations, and visions competing at the top, and those informal management mechanisms can start to break down.
As virtually any episode of Succession will attest, the results can range from family squabbles to poor governance, bad management decisions, a lack of accountability, and even fraud and malpractice. Moreover, subsequent generations will not necessarily have the same talent and enthusiasm as the first, and family-owned companies can be more indulgent toward poor performers.
To avoid these pitfalls and improve discipline and transparency, as a business grows it’s worth aiming to follow national corporate governance codes, as public companies do. Those companies have structures such as board committees and secretariat functions, with well-defined roles and accountabilities. Risks and key decisions are managed through clear procedures, as are succession plans and senior appointments. Together, these structures can enhance a company’s short-term performance and risk management.
For more insights to support your business, connect with Old National Bank today.
This article was written by Michelle Daisley and Stéphane Birchler from Inc. and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.
