How Old is Old?
Recently, Business Financing UK published an interesting piece detailing the world’s oldest companies still in business today1. A notable example is that of Ma Yu Ching’s Bucket Chicken House, which the report claims to be the oldest Chinese restaurant still in operation. First opened in Kaifeng, China, the restaurant has survived many dynasties, boasting a long heritage! Research on this topic has plenty of scope for expansion and further studies, but companies like these set an excellent precedent for multi-generational family businesses to take inspiration in pursuit of their own legacy that rides the ups and downs of history.
What have they done right?
How have they demonstrated resilience in the face of a continuously changing competitive landscape?
How have they adapted their businesses to reflect the climate of the times?
The declining life expectancy of family businesses
Family businesses deliver an exceptional amount of value to society and the economy. According to research firm Wealth-X, as much as USD15.4 trillion will be passed down from one generation through the next between now and 20302. Family businesses also contribute between 70-90 per cent of global GDP and create 50-80 per cent of jobs worldwide3.
But it is also true that fewer than one-third of family businesses survive from the first to the second generation; and an even smaller proportion are able to pass on their companies to the third generation4. The trend we are seeing is one where companies rise quickly, attaining impressive success, but for one reason or another do not survive a generational change in leadership. Fortune magazine reported that in the 1960s the average lifespan of a company in the S&P was roughly 60 years, whereas today it is closer to 205.
In light of this, there are important questions for family business owners to ask themselves:
Is our existing business model fit to last for 25, 50, even 100 or more years?
How can we improve customer satisfaction and loyalty while continuing to exceed client expectations?
Are we always looking for new ways of doing things and nurturing an entrepreneurial culture in our firms?
Communicating for the future
The art of effective communications is a well-researched topic. For family business owners, involving stakeholders in discussions about the business and its future is paramount. It is important that expectations about roles and responsibilities are managed and an environment of trust is created.
In the previous article, we summarised effective communications strategies for strengthening the bonds and working relationships between members of the business family. Today we would like to discuss communications in the context of the actual family business. Below are a few points for reflection:
- Building a positive company culture
Inter-personal dynamics between stakeholders of a family business are much more complicated given potentially conflicting agendas6. To improve collaboration, developing a winning company culture, which drives employee behaviour, is key to unlocking value within family businesses. Practical ways of achieving this include encouraging open dialogue based on common goals and shared purpose; as well as creating simple, precise and well-structured internal slogans and messages that reflect your business’s vision, mission and values.
- Establishing and strengthening connections
To rise above choppy business environments and difficult market conditions, consider taking a break to bond as a team. Schedule office retreats (when the COVID-19 situation has improved) to relax and engage in activities that will bring team members closer together. Getting to know your colleagues personally, and learning about how they prefer to communicate and interact, can go a long way to improving collaboration and creating trust. Using personality typing tools can also help to understand the diversity of behaviour within your business team.
- Building trust catalysts across teams
Creating projects can bring together otherwise siloed functional teams to build mutual trust. More opportunities for collaboration amongst colleagues creates a culture where a sense of belonging is felt and trust is built across the company.
- Improving communication processes and tools
As family businesses grow from one generation through the next, it becomes necessary to formalise communication channels7. Reviewing the existing norms of communication in a family business is helpful for determining what has or has not worked in the past. Using the company’s intranet to send internal newsletters is a great way to ensure your teams receive the information they need to carry out their work and involve themselves in company activities. Newsletters can also be used to celebrate successes, which helps build solidarity and a culture of belonging. Lastly, social media channels can be used to simultaneously build relationships with clients and work toward your business goals.
- Leading by example
The leader of a family business has the opportunity to shape the culture of their company from the top down. One of the most important steps in doing so is sending out clear communications.8 This can take the form of meeting regularly with employees about their needs at work; maintaining an open and welcoming attitude so employees feel comfortable voicing any thoughts or concerns; and being there to celebrate employees’ birthdays, anniversaries and important life events.
In family businesses, good communication is as important at the company level as it is at the family level. The challenge is discerning and working out a long term alignment between the two. This is where it can help to work with a partner like HSBC to facilitate dialogues between different family and non-family stakeholders.Businesses with inclusive corporate governance and communication plans designed with the family in mind stand a better chance of persevering across generations.
At HSBC Private Banking, we understand the challenge of navigating uncertainty and continuously changing circumstances. Our role is to walk alongside your family business, assisting with succession planning of your family and helping you manage and maintain continuity across generations. Above all, we want to see your family business thrive, now and into the future.
Please contact us or your Relationship Manager to discuss how we can assist you in achieving your business and family’s enduring legacy.