The Rise of Global Entrepreneurial Families: Successful Management of Growth and Diversity

The Rise of Global Entrepreneurial Families: Successful Management of Growth and Diversity

The rise of global entrepreneurial families is inexorable. More and more successful family businesses expand across national borders and become international players in the business world. The different aims of individual family members are changing and it is not rare that conflicts are common. The successful management of growth and diversity is crucial for the long-term success of these family businesses: But how can one manage to resolve such conflicts internally, not let them legally escalate, and avoid damage to the reputation in the public discussion and the media?

I. The Challenges of Managing Growth and Diversity

The management of growth and diversity in global entrepreneurial families is no easy task. It requires a high degree of strategic planning, clear communication and the development of a strong management team. One of the greatest challenges is the establishment of clear communication channels in order to ensure that all parties concerned have the same level of knowledge and can jointly work on the corporate goals. In this sense, however, communication does not mean spreading information but mainly to listen and identify the different needs existing in the family and make them a subject of discussion early on.

Furthermore, the implementation of effective management structures is of vital importance. Decision-making paths and conflict solution mechanisms need to be established that are efficient and transparent in order to promote the growth and success of the company. In addition, the development of a strong management team, which enjoys the confidence of the family members, and at the same time contributes the required competence, is indispensable. This team should dispose of the necessary skills and experience to successfully lead the company in a global environment — a requirement that is becoming more and more difficult to fulfil.

II. Strategies for Successful Growth Management

Global entrepreneurial families must be able to cope with growth and setbacks. When problems arise, almost always the root of evil is a different level of knowledge or an unclear level of information. So, the establishment of clear communication channels and information systems is crucial to manage the growth of global entrepreneurial families. Information can be effectively exchanged by means of regular meetings, clear communication guidelines, and the use of appropriate technologies. The bigger and more diverse the family, the more important it is to “leave no one behind”. Thus, it is ensured that all parties concerned are on the same level and can jointly work on the corporate goals, and are also able to assess and understand setbacks.

Another important strategy is the implementation of effective management structures. This comprises the definition of clear responsibilities and decision-making processes as well as the introduction of performance indicators in order to measure progress. These, however, must not only be established; they have to be accepted as well. This means a lot of work — only if responsibilities are accepted it is possible to reduce envy and resentment. It is very easy to spark arguments in a non-transparent decision-making structure. With a clear, coordinated and accepted organizational structure it is ensured that all tasks and responsibilities are clearly allocated, and the business can be efficiently managed.

Needless to say: In addition, the development of a strong management team is of vital importance. It should consist of talented executives disposing of the required skills and experience to successfully lead the company. The personalities need sufficient independence from the family; they should represent and understand the essential balance of power. And they should also be able to enforce an objective discipline ex officio based on experience and skill. Due to targeted personnel development and the promotion of executives from the company's own ranks, the suitable talents within the family can also be identified and promoted. Being a family member is no sufficient qualification.

III. Tips for Handling Diversity

The increasing diversity in global entrepreneurial families — meaning, in particular, cultural, religious and geographic diversity — requires a special approach to handle it successfully. The basic hypothesis is the larger a family becomes the more it equals the normal distribution of society. Those who assume an average quality will experience fewer negative surprises.

A very important step is the active cultural work, the understanding and recognition of cultural differences. It is important to respect the diversity of employees and family members, and to turn them into an opportunity. By promoting inclusion and equality it is possible to create a work environment, in which all those concerned feel appreciated and heard — and where they can also contribute their experiences and perceptions.

The promotion of open dialogs and collaboration is easy to say, however, it requires active commitment: family days, youth exchange programs, joint journeys, etc. These must be attractive and useful. Due to the exchange of ideas and perspectives, new approaches to solution can be found and innovative ideas developed. This requires an open communication culture, in which all people involved are encouraged to express their opinions, and actively participate in company affairs.

IV. The Role of Technology in the Management of Global Entrepreneurial Families

The role of technology in the management of global entrepreneurial families is becoming more and more important — virtual meetings and tools for joint project work enable employees and family members toefficiently collaborate regardless of their respective location. These are no substitutes for physical meetings but they area wonderful opportunity to systematically enhance existing relationships. Virtual meetings are particularly effective when something has to be jointly worked out.

In addition, technologies can be used for recording and analyzing data in order to gain insights into the business operation and make informed decisions. Due to the use of data analyses, trends and patterns can be identified that support strategic planning and decision-making. These tools help to create a common view onto the family and the businesses and keep all members of the family up to date. In the end, this is a very effective opportunity to keep the family's view of themselves updated, and in this way anchor the common view in a structured and systematic manner. In this way it is possible to prevent misunderstandings, and due to a common objective view often defuse or identify conflicts early on.

V. Case Studies of Successful Entrepreneurial Families

There are many successful entrepreneurial families in the German-Swiss environment that have developed various strategies. All of them have incommon that there are very different ways to the management of families, and that the exchange between the family members creates an important field for the exchange of experience.

In order to get the next generations accustomed to the relatives in steadily growing families, regular family days are organized. Here, it is not so much the company that is in focus, but rather the mutual getting to know each other already in childhood. In this manner, trust is intended to be built at an early stage. At the same time, the connection, the shared responsibility for the company, which is led by a non-family management, is strengthened.

Another contribution to shared responsibility is the fact that each member of the family can — but does not have to — assume a task. Depending on skills and inclinations, this can be inside the company but also outside. For this purpose, opportunities have been created in foundations of the family or other organizations. For tasks inside the company, it applies that each family member has to go through the normal process anchored in the company. The company interests always take center stage. Exceptions are not possible and not desirable. This principle should, together with others, be stipulated in a family charter. One entrepreneurial family, owner of a major listed group, solved internal conflicts by delegating the leadership competence to only one member of the family. All other family members refrain themselves, are not involved in the company. On family day, there is always great potential for conflicts when it comes to dividends — for many family members have “taken leave” years ago already, and judge the performance of the group on the basis of “old knowledge”.

Another family purposefully positioned family members in different parts of the group in different functions as CEO, CFO, board members, or also in marketing. These family members have found their places in the hierarchy, have prevailed over other candidates. In this way, the critique of “favoritism” is successfully prevented. Yet, there is envy again and again.

One entrepreneurial family, whose head had missed the right time to resign, was subjected to control by a legal guardian on health grounds. The guardian engaged a professional management. The family profits only financially as the owner. The management achieved the turnaround of the group but is always on the verge of a legal dispute with the “heirs”.

VI. Dos and Don'ts for the Management of Families

In addition, professional networks and associations can be used for the exchange with other family-owned companies and learn from their experiences. These networks provide the opportunity to establish contacts, exchange best practices, and work together on solutions.

Another important aspect is advice from experts. Here, however, it is important to choose the right consultant. Very often, families rely on lawyers. However, experience shows that these are mainly competent in legal issues and do not shy away from legal disputes which then rapidly become topics in the media. In some instances, lawyers even cooperate directly with the media in order to build up pressure. These family dramas can then be regularly read about in monthly magazines. For this reason, lawyers should be avoided in the management role, as they are often focused on conflicts and legal disputes. Instead, consultants should be called in, who strengthen the company in its internal and external reputation and are able to ensure credible communication. Communication consultants, for instance, are experienced in avoiding conflicts and seeking compromises or negotiation solutions, respectively, which strengthen the family ties and do not escalate conflicts. In general, de-escalation strategies create legitimation.

VII. Conclusion and Final Thoughts

The management of growth and diversity in global entrepreneurial families is a complex task requiring strategic planning and wise decisions. By establishing clear communication channels, implementing effective management structures and developing a strong management team, these challenges can be successfully overcome.

In addition, it is important to acknowledge diversity, create inclusive working environments and promote open dialogs. The proper use of technologies can help to facilitate collaboration and to use data analyses for well-informed decisions.

With the right resources and tools, such as books, professional networks and consulting services, family-owned companies can further develop their skills in growth and diversity management.

All things considered, the management of growth and diversity is an ongoing process requiring continuous adjustments and improvements. When family-owned companies heed the presented tips and strategies and learn from successful case studies, they will be able to assert themselves on the global market and secure their long-term success.

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