Revolutionary or Evolutionary Change: A Question for the Family Business

How well does your family business embrace change? What are the fundamental kinds of change? What will happen to the family and the business if significant changes such as in culture and leadership are not met? The short answer is that if family businesses do not embrace change – both evolutionary and revolutionary – they will die a slow and most likely a painful death.  How can family business leaders not only avoid this but actually embrace the future well?

I believe there are two overall kinds of change –evolutionary and revolutionary.  By evolutionary I mean those changes that are part of the normal growth cycle of the family, the business, the individuals.  Evolutionary change is the kind of change that is needed to adapt to the natural growth needs either internal to the individual, the family or organization or external to its environment.  For example, as a business grows it must learn how to produce more efficiently or how to develop new markets.  As family children grow and marry, the family must find a way to integrate the in-laws and new children.   If family members join the business and become more competent, job roles must be developed that challenge and bring their strengths to productive fruition.  A critical challenge of evolutionary change is facing Succession.  Facing this change well creates a successful transition of leadership and provides for long-term sustainability of the family’s wealth and business.

Other times, the family business needs revolutionary change.  Revolutionary change is the kind of change that transforms the culture or paradigm of a family, a business or the inner workings of a human being.  It is needed when the way the system is functioning is clearly not working. Perhaps an atmosphere of blame and secrecy is leading the company towards spending millions of pesos control systems.  Perhaps in the business the younger daughter is much more competent then the oldest son and both want to lead the business.  Perhaps in the family Mom dies suddenly leaving Dad to make a home.

When deep issues of change are not faced, the family, the business and individuals all will suffer. The first question is often what kind of change is needed and what can we do to best prepare for it.  Witness the “Ace Manufacturing Company”  started by a wonderful, hard-working entrepreneur who after planning for many years to leave the company to his able children is now faced with two of the most competent ones leaving the company.   The patriarch, now 70 years old instead gradually turning over the reins of leadership finds himself more and more involved in the day-to-day running of the business with no clear successor.  The patriarch is getting tired, although the business is still solid – its growth rate is quite small. Why did this happen?

In private interviews, one son said.  “I’ve been working here for 10 years,  Dad would never give up control, we had no real decision-making power,  I wanted to build my own strategy.  What Dad built was great but even though I graduated Wharton, and have worked here competently for years I have had little say or decision-making power about the Marketing Strategy.  Another child said  “Even though I was in charge of the  Cali division – Dad was looking over my shoulder even commanding my Operations Chief. 

This is a sad case.  The father loved his children and had planned for his kids to replace him since he started the company forty years ago. The second generation brought skills to the company which would be very difficult to replace.  Although the need now is “evolutionary”, the window of opportunity was 10 years ago and it required revolutionary change – a change in leadership style and the organization’s culture at that time.  Was it possible?  Absolutely Yes – but it would require substantial effort – one of a revolutionary scale.   By failing to make those changes at the time of need this family business is on the brink of failure in its evolution to the next generation.

Just like in business, as the competition increases, the business must find new ways to increase market share or get into new markets utilizing their resources.  If they don’t, then the business is likely to fail.  Certainly many business researchers would argue that it is those business leaders who embrace change that tend to be the leaders in their industry.  In the family, it is no different.  Families that do not find positive and creative ways to deal with major evolutionary changes such as changing personal needs, in-laws, children, and geographic dispersion will become less and less vital. Rather then sources of joy they will become one more of obligation.

What changes are facing your family business and are they revolutionary or evolutionary?  When you’re ready to face these questions invite in an advisor – and ask for a comprehensive assessment of the kinds of changes your family business must embrace to succeed in the future.

Marc@Sii-Inc.Net