It’s often said that only a third of family businesses manage to transition to the next generation, leaving only a few making it to the fourth. What we know for sure is that those who successfully transition through generations develop a distinctive entrepreneurial orientation at each stage. This means the new generation is able to write their family’s new narrative over the course of a generation, freed from the emotional pressure passed down by the previous one: the duty towards the family.
Family businesses should innovate to stay alive, which implies overcoming several challenges. Firstly, they should be able to meet the challenges of their generation. Secondly, they need to clearly differentiate the family business from the entrepreneurial family since the greatest innovations can also come from outside the company.
In addition to the above, the family needs to be able to finance these innovations. And finally, as all business models are changing, family businesses must shift from an extractive to a regenerative model if they wish to continue their family saga into the next generation.
But how can an entrepreneurial family initiate this shift towards a regenerative culture?
The regenerative family model
The regenerative family model consists of two parts: The first part is the spine, or the core of the family, which deals with the head, the heart and the body. The second part deals with the four action territories to engage the company and the family in this shift.
Part 1: Head, heart and body
The head: Ambition
The head represents the entrepreneurial family’s ambition. In addition to growing financial capital, entrepreneurial families committed to switching from an extractive to a regenerative model develop three other types of capital: reputational, societal and environmental capital. Structuring an ambition that distinctively integrates these four capitals helps attract the new generations to join the family movement.
The heart: Trust
All companies work on their vision, their ambition, their strategy and a good execution plan to make their project a success with the best possible team, but few work on trust. Yet, without trust, everything is more complicated and slower. Without trust, there’s more control and less initiative and innovation.
The body: History
The body represents the history of the entrepreneurial family. Over the generations, families have built businesses, but above all they have built a reputation, a significant societal impact and a family responsibility to employees and territories.
Regenerative families reflect on their family narrative to understand their roots, their history, their values, their psychodynamic system, and the way in which conflicts arise and are dealt with. They project this narrative into the next 20 years to continue dreaming together with the new generation on board.
Part 2: The four areas of action for family businesses
These territories are all intended to be interdependent and need to be worked on in parallel with appropriate governance bodies to engage the family in contributing to the appropriate circles.
1. The family business: Initiating the shift from an extractive to a regenerative model
This is a challenge for all companies. If they missed the digital revolution a few years ago and are still alive, they will not survive the sustainable revolution that is shaking up industries worldwide.
2. Entrepreneurial activities
A distinctive entrepreneurial orientation at each generation is a must-have to succeed in intergenerational transitions. Innovating is one thing, but financing innovation is another, and this is one of the challenges for these entrepreneurial families.
3. Family wealth: From dependence on the family business to an interdependence with impact
It is often said that family businesses are more enduring over time, especially in times of crisis. This is mainly because they reinvest most of their profits back into the business and distribute less than others. This war chest sometimes constitutes a very significant treasury in support of the business’s longevity.
However, this creates a significant imbalance between the professional wealth and the private wealth of the family. This imbalance then creates a dependency on the family business and increases emotional pressure on the family and a certain belief that ensuring the company’s longevity is preserving and securing the family: emotionally and financially.
Rebalancing private wealth and professional wealth is one of the good practices of regenerative families because it allows the family’s protection to be separated from the success of the business.
4. The family: Understanding its shadow side
Business is complicated, but family is complex. Doing business with family requires accepting its shadow side and engaging the family to professionalize to succeed through generations.
The regenerative family model with the core and four territories
To sum it all up
Building your family’s new narrative for the next 20 years by meeting the planet’s major challenges with the help of your entrepreneurial family and its businesses is a formidable adventure. Trust is at its heart, ambition its head, and its narrative, its body.
And you, what will be the new narrative of your regenerative family by 2050?
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