Global consulting leader Mckinsey & Company wrote a very timely article about innovation as a launchpad out of COVID-19 and it clearly highlighted a strong message, “to innovate your way out of this downturn, you need to change behaviors and mindsets—starting at the very top. Crises are adrenaline for innovation. You must make decisions quickly under extremely uncertain conditions, and you never have enough time or information to fully weigh difficult choices that may affect both employee livelihoods and the survival of the business. Yet these very constraints can unleash waves of creativity. Necessity and urgency spur ideas and dissipate inertia. Leading innovators seize such conditions to reshape mindsets and behaviors, embracing the opportunity to uncover fresh solutions and make bold bets that can reignite growth.”
Building the right team
This leads me to emphatically call on family business owners to stop agonizing and start organizing. After one year of waiting, it is now time to pick up the pieces and focus on getting the right professionals, one essential outsider at a time. We are facing an unprecedented crisis never before experienced in our lifetime. There is no go-to-playbook to apply in dealing with the complex interrelated problems confronting businesses. The truth is that the pandemic was a global shock “like no other” involving simultaneous disruptions to both supply and demand in an interconnected world economy. After decades of resisting change, we have come to a crossroads that makes it impossible not to embrace new realities. Every business, large and small, has been threatened, and every leader is facing deep challenges. For 2021, there is no room for complacency nor short-sighted decisions.
As family firms become larger and more complex, the foundations have to be laid for a more structured, less centralized organization. The task is more difficult for family businesses than for non-family enterprises because there is a strong temptation in many family firms to depend on internal experience and judgments. This natural tendency to rely on blood can be countered by the effective use of outside talent, advisors, or managers. And the decision to appoint outsiders may be difficult and challenging. There will be never-ending opposition from all sides as this marks a major cultural shift. But the reality is this: it is an important step in making the family enterprise embrace external influence and when done right, can help secure its future. In a Nikkei interview with Dhanin Chearavanont, senior chairman of the Thailand-based conglomerate Charoen Pokphan Group (CP Group) that has an annual revenue turnover of US$63 B (San Miguel Corp.'s annual revenue is only US$20.6 B, the Thai billionaire said “rather than continue to do everything ourselves, we decided to bring in outside experts to manage the company. Novices can only run a business for so long before its operations become too large and complex for them to handle.” This is one of the reasons why the CP Group, which started as a tiny store with only a handful of employees quickly joined the ranks of international businesses with more than 360,000 employees dispersed to more than 30 countries across five continents. It is the world's largest animal feed producer and also one of the largest poultry, swine, and shrimp producers.
Family governance first, hire top outside talent next
When my firm, W+B Family Advisory Group, sent a family governance survey a couple of years ago to successful Asian family business leaders, we asked them what critical initiatives they made during the difficult transition from a mom-and-pop business to a high-performing enterprise. Their collective answer was family governance. They believed that governance helped them create a structure that aligned the family to the business under an atmosphere of competence, trust, accountability, family unity, and sense of purpose, avoiding potential conflicts not only over financial issues but also over personal relationships. When we asked about another major initiative they took that they were thankful they did, they ranked the engagement of external influences (advisors, independent, and managers) as the second-highest after family governance. By being outward-looking and willing to take advantage of external skills, family enterprises are better able to grow and respond successfully.