How the family business maintains its strength in a dynamic marketplace

31 December 2015

31 December 2015


Family businesses are indispensable and strong pillars of the Dutch economy. The approximately 260,000 Dutch family businesses account for nearly 50 percent of employment and over 50 percent of the Gross National Product. And the relevance of family businesses is only increasing: the big multinationals are investing less and less in the Netherlands and moving innovation centers to countries outside Europe. But this does not mean that it has become easier for family businesses to ensure continuity. The combination of the continuous acceleration of technological developments, limited economic growth and economic uncertainty means that family businesses cannot sit still either. More than ever, they will need to remain entrepreneurial and innovative. Although entrepreneurship is traditionally in the genes, it can be challenging, especially for subsequent generations in the family business, to continue to reinvent oneself. In doing so, they will need to mobilize the entire organization, but that is often not the strength of the family business. In 5 steps, however, it is possible to remain innovative, entrepreneurial and therefore customer-oriented.

The strength of the family business is also its Achilles heel

Family businesses have strong assets. Entrepreneurship, an eye for the customer and perseverance, from the first and second generation in particular, provide movement, energy and are and have been the basis for success. The family itself often has the ideas and in doing so needs employees who work hard and are committed and loyal to the family. This is characteristic of family businesses: the initiatives come from the family and the employees put their shoulders to the wheel and make sure it gets done. This has made the family business powerful and successful.

The flip side of the coin is that employees are often primarily executive and come up with fewer ideas of their own in terms of product or process innovation. Whereas today, in particular, more innovative ability and change power is needed to stay relevant and successful as a company. By consciously taking several steps with all employees, the company can reinvent itself and remain the engine of the economy.

Step 1: Make yourself aware of strengths and distinctiveness

Are we aware of why we are (or were) successful? What do we do differently, why do customers value us? What makes people love working in this company? With what values and culture do we do business and work together? The so-called collective culture is often not made explicit. Precisely by making the capabilities of the organization concrete, we also know what we need to preserve into the future. Of course, we want to avoid losing the strength of the company during the change as well.

Step 2: Create a strong management team alongside the family/DGA

In many family businesses, all decisions go through the DGA. With him or her all the lines come together and the trade-offs are made. Especially with family businesses that have experienced substantial growth, this no longer works well. The family simply cannot keep track of all the details and developments anymore. Create a strong management team that is not wait-and-see for the family, but comes up with its own ideas and dares to push back against the family. Not from an ego, but from a heart for the cause. Only with a solid foundation can the next steps be made.

Step 3: Create an inspiring dot on the horizon

Where do we want to go? What role do we want to play in the industry? How do we ensure that we continue to engage and captivate employees and customers? Providing reliable service at a reasonable price is no longer enough. The young generation wants to be involved in a company that inspires, wants to be ahead of the curve and is bold. Create an inspiring dot on the horizon that really touches people. And make sure that this dot also becomes concrete and receives attention in practice.

Step 4: Steer for output rather than input by learning to delegate

As a family business, do you want especially loyal and engaged employees? Or do you want employees who are empowered, come up with their own initiatives and suggest improvements. The biggest challenge for family businesses is to inspire their employees in a different way. Commitment and loyalty are often expressions of reactivity: following the owner. However, what you want are employees who take initiative and ownership. Precisely by not giving them more task-oriented assignments, but by giving them responsibility and thus focus on output. This is often difficult because it requires the family to learn to delegate and let go.

Step 5: Make room for innovation and encourage entrepreneurship

Traditionally, innovation and entrepreneurship have been linked to the family. It sometimes seems like the exclusive domain of the family: they undertake, while the employees mainly execute. The family business of the future is able to extend entrepreneurship to the entire organization and challenge employees to think and act “out of the box.” This also changes the role of the family: from initiator it becomes facilitator. This dramatically improves the innovativeness of the entire organization, and customers are increasingly aware of the company.

These five steps may sound simple. They are, and at the same time they are often difficult for many family businesses to comply with. The biggest challenge is learning to delegate and let go. To learn to experience that it is fun and good when more employees are given the opportunity to be entrepreneurial. And at the same time ensure that the core, essence and strength of the business is maintained. This requires a different role of the family, but surely that should be possible for entrepreneurs who are good at finding and capitalizing on opportunities like no other?