Four factors that successful family enterprises embed in their DNA

Family enterprises have unique needs as they pursue success across generations. While they of course have the same goal as their non-family-owned counterparts in seeking long-term business success, family companies also factor in their desire to build an intergenerational legacy, balanced with the diverse desires of family members.

Individual family members often have varied relationships and interests; some may not be interested in continuing the business, while others may wish to change it fundamentally. And the next generation is pushing new topics to the top of the agenda in family enterprises around the world, from diversity and digital transformation to philanthropy and inclusive capitalism.

Challenges like these show how hard it can be to navigate the rational tasks of running a business with the more emotional elements of family dynamics. Leaders of enduring family enterprises balance these personal and business performance agendas by embedding key success factors into their DNA that facilitate family cohesion, business growth and long-term wealth preservation. 

Communicate so the family that works together, stays together

When business-owning families grow significantly in number and complexity, a good plan for succession becomes an imperative. For some family enterprises, survival to the second or third generation can be difficult due to governance challenges or internal conflicts.

Communication is key. Successful families preserve cohesion by implementing a strong governance framework, communicating regularly and planning for succession. They are ready to manage conflicts and take every family member’s contribution seriously. This approach helps transfer core values and principles of ownership and simultaneously creates future opportunities to deliver financial and social value.

Build family unity through shared values

Fiscal, legal and financial questions often arise hand in hand with the very personal aims and values of family members. There can be conflicts over the way money and power are distributed, and differing goals between generation can create new struggles.

Leading families have a common purpose and shared values that help them decide what matters to the family and the business, including philanthropic activities and corporate responsibility. They create road maps to guide their decision-making and rely on strong governance frameworks to help family members manage their differences in a way that preserves cohesion and does not jeopardize the enterprise’s future.

Pay attention to the needs of the business

As families divide profit among more family members, sustainable growth and profitability of the business become more important. Pursuing these goals successfully can be difficult in family enterprises that are beholden to tradition and how they’ve always done things. Flexible ones cultivate ambition and innovation within the family while also bringing in new talent.

Successful families embrace change and foster entrepreneurial spirit among successive generations of family members as the enterprise matures. They navigate the unpredictability of technology and sudden disruption by deploying strategies that account for broader business capabilities.

Manage risk to preserve assets for the long term

In family enterprises, private assets and company assets are often linked and intermingled. As the complexity of managing the family wealth increases, families look to professionalize this process through family office functions. This allows them to develop a comprehensive risk management framework, quick decision-making routes, and tax planning strategies that account for both personal and corporate needs.

Successful families leverage their resources to optimize costs and enable growth. To better protect their assets, they establish systems and processes to manage their wealth in a manner that achieves operational efficiencies and cost savings while reinforcing family values and fostering family unity.

Navigating these dimensions of family, values, business and assets requires careful consideration of how each of them stands within the DNA of an individual family enterprise. While every family enterprise is unique, successful ones have much in common. To emulate their success, family enterprise leaders can use a model, such as the EY Family Enterprise DNA Model, to better understand their personal and business agendas. That understanding can help the business and the family succeed across generations.