Effective Leadership Roles in Family Businesses: A Blueprint for Success

Crafting Leadership Roles

In a previous piece, we delved into the global landscape of leadership within family business systems and its impact on performance. To illustrate exemplary leadership in a high-performing family enterprise, we introduced Nelson Sirotsky, Chairman of RBS, who smoothly transitioned leadership after decades as CEO of his family's media business.

Whether you opt for a single leader model, akin to RBS, or a team-based approach, the crucial step remains the same: designing, structuring, and allocating essential leadership roles. The reason is simple – poorly designed and haphazardly structured leadership roles seldom yield the decisiveness and unity vital for a family business's long-term success. So, how do you navigate the terrain of leadership roles? This article will provide you with valuable insights.

Leading, Managing, and Governing

Effective governance provides an overarching sense of purpose and stability to a group. Stability is the bedrock of long-term planning, a distinct advantage that family businesses possess. However, to retain this edge, robust governance is imperative. It ensures that plans can be devised, problems resolved, leaders nurtured, and disputes settled, all while preserving the group's unity. Achieving this hinges on having well-crafted rules, policies, agreements, and plans in place, along with dedicated forums like boards, family councils, and owner meetings to develop and fine-tune these elements and resolve critical issues.

While a single capable leader with legitimacy can provide effective governance, their finite time and attention necessitate collaboration among key stakeholders. This often leads to the formation of various leadership groups:

• A shareholders' council and owner meetings for owner-centric governance.
• A board of directors for business and owner governance.
• A family council to contribute to family governance.

Each of these groups requires adept leadership to function optimally, potentially resulting in a leadership team consisting of several individuals. The leader of the business may differ from the chairman of the board, and the leader of the owners may be the business leader or a group of influential owners. The family council leader might not always be the family's head. Even with a dominant family leader, deputy leaders usually manage different facets of the system in close collaboration with the ultimate leader, a model exemplified by the RBS system.

Leading: A Personal Endeavor

Leadership entails more than managing tasks; it involves inspiring, persuading, and motivating individuals to work collaboratively towards significant objectives. This requires creating a compelling vision for the future, strategizing the path forward, and instigating change when necessary. Effective leaders connect with their followers personally, using compelling ideas and their character to build loyalty and support. They lead by example, aligning their cause with that of their followers.

The most successful family business leaders, regardless of their style, embody the ethos of “servant leaders” or “servant partners.” They hold strong convictions about how their companies should operate, how co-owners should invest, and how families should conduct themselves. Yet, they also prioritize fairness, partnership, and the greater good. These leaders make tough decisions to uphold the group's standards and aspirations.

Managing: The Art of Efficiency

In contrast, management revolves around optimizing the group's efficiency and effectiveness. It encompasses planning, organizing, problem-solving, resource allocation, and performance assessment. Management complements leadership by ensuring tasks are executed proficiently, on time, and within budget.

Effective management is a cornerstone of business and family success. However, overemphasizing management can lead to overbearing control, hindering leadership and governance. Striking the right balance is crucial.

The Role of Governance

Many challenges within families stem from inadequate governance and leadership rather than management issues. In the governance realm, issues like unclear mission and core values, lacking behavioral guidelines, or the absence of structured forums for discussions and conflict resolution often plague family businesses. In terms of leadership, the absence of a clear vision, reluctance to adapt to changing circumstances, and uninspiring leadership contribute to issues. Addressing these challenges requires deep inspiration and commitment, essential attributes for tackling significant hurdles.

In summary, businesses, families, and ownership groups require a blend of governance, leadership, and management. Effective leaders engage in all three activities, albeit with varying focus depending on circumstances. Balancing these aspects is key to a family business's sustained success.