Leadership Best Practices in Family Businesses

Leadership Best Practices in Family Businesses

Fernández-Aráoz, Iqbal and Ritter (2015) conducted research among 50 leading family-owned or family-controlled companies to find best leadership practices in family businesses:

1. DEVELOPING A GOOD-GOVERNANCE BASELINE: Naturally, governance is a critical components for family businesses that desire to hire and retain the most talented employees to stay competitive on the long run. This is basically impossible without the establishment of good governance, especially in terms of separating the family from the business.
2. FAMILY GRAVITY: Although successful large businesses often have a large share of non-family members within their business, the researched demonstrated it is critical to hold on to 'family gravity’, which means that they should focus on keeping what makes your particular business so special.
3. COMPETENCIES OF FUTURE LEADERS: although successful family businesses with the aforementioned traits are usually attractive to potential managers, it is critical to find the best out of those. Frequently mentioned competencies that were considered important in a potential leader are:
   - Strategic/results orientation, market insights;
   - Collaboration and influence;
   - Experience with organizational development, team/change leadership).
   But also critical are:
   - An understanding of the organization’s ownership dynamics
   - An understanding of the responsibilities that come with leading a family business.
   However the most critical component in potential leaders is:
   - 'Cultural fit’ – which means the overlap in values between family- and non-family members.
4. DISCIPLINED CEO SUCCESSION: The research revealed that only few companies followed an adequate and structured selection process, while most companies chose new leaders based on intuition. The best family businesses adopted a selection method based on disciplined processes , including
   a. Discussions and commitment by shareholders;
   b. Multiple candidates from which a selection is made;
   c. Integration and development of the successor.

Source: Fernández-Aráoz, C., Iqbal, S. and J. Ritter (2015) “Leadership Lessons from Great Family Businesses” HBR April 2015

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