Harvard Business Review Family Business Handbook: How to Build and Sustain a Successful, Enduring Enterprise
Josh Baron and Rob Lachenauer
Harvard Business Review Press (January 2021)
“Vision without execution is hallucination.” Thomas Edison
There are 5.5 million family-owned businesses in the U.S. where they comprise about 90% of all businesses. Here’s another statistic that also caught my eye: About 70% of family businesses fail or are acquired within 24 months after they are launched and only 10% are still in business for third-generation family members to lead.
Why did Josh Baron and Rob Lachenauer write this book? According to Lachenauer, “We want to share some lessons we’ve learned from our clients [at BanyanGlobal Family Business Advisors] about what it takes to succeed with family businesses, and we also want to fill a gap in how we talk about family businesses. [in business schools and most business books], there’s a lot of focus on the daily part of family business, but there’s very little talk about what ownership means for the family business.”
Baron adds, “Yes, business schools spend a lot of time teaching people how to manage or how to do specific parts of the business, but they don’t spend nearly enough on what it takes to be an owner of a business. You can’t outsource ownership and if there’s one thing the book does extremely well it is to explain the real work and rights of ownership. One thing I’d add is that we wrote this book to be a very practical guide. Everything that we cover are things that we’ve tried and actually test-driven with families, and I think the ideas and the wealth and variety of different experiences that we bring to the table are striking and informative.”
Although members of a family may be active or passive co-owners of a business, however, the fact remains that all of the healthiest organizations have a workplace culture within which everyone involved thinks and functions in terms of first-person PLURAL pronouns.
Both family-owned and shareholder-owned businesses face many of the same challenges, viewed as WHATs. These challenges include hiring and retaining valuable workers, accelerating their development as leaders and managers, creating demand for what the business offers, allocating resources, eliminating waste, creating worker and customer “evangelists,” and continuously improving operations at all levels and in all areas.
That said, Baron and Lachenaurer focus in this book on the HOWs — critically important dos and don’ts, to keep in mind — when family-owned businesses respond to the challenges today that are more volatile, more uncertain, more complex, and more ambiguous than at any prior time that I can remember.
With regard to the coronavirus, it obviously poses serious challenges that [begin italics] all [end italics] organizations face, whatever their size, nature, and sector may be. In their article for Harvard Business Review, “A Crisis Playbook for Family Businesses,” Baron and Ben Francois suggest five specific actions that owners need to take in order to ensure that company leaders – especially executives and boards – have the proper guidance and tools to respond to the crisis: Define what type of family business they want to preserve, review their governance structure and processes, revisit their “owner strategy” for their company, use communication to sustain trusted relationships, and finally, consider the implications for the transition to the next generation.
In my opinion, these are among the most important HOWs that Josh Baron and Rob Lachenauer explain:
o Establish and nourish what Peter Senge characterizes as a “total learning organization”
o Help everyone involved to become effective problem-identifiers
o Enforce zero tolerance of incivility
o Encourage principled dissent, speaking to power, candor, etc.
o Recognize and reward high-impact teamwork
o Support “the five rights of family owners”
o Use effective communication to build relationships based on mutual trust
o Develop a plan for the possible/probably transition to the next generation
o Resolve conflicts within the family business (e.g. locate the “Goldilocks zone of conflict”
o Detect early-warning signs of loss of control, emerging vulnerabilities, potential crises, etc.
Information, insights, and counsel that help a reader to achieve any one of these strategic objectives is worth far more than the cost of the book.
Harvard Business Review Family Business Handbook is a brilliant achievement. Bravo!
Those who read it are urged to check out Brad Feld and Ian Hathaway’s The Startup Community Way: Evolving an Entrepreneurial System, published by John Wiley & Sons (July 2020). And I wholly agree with Eric Ries, author of The Lean Startup: “We need entrepreneurs and their ideas to keep our society moving forward, just economically but equitably. The nurturing of startups, which is amplified by multitudes when they share in a community if organizations and people, is the best way to make sure we achieve that goal.”