The world’s most successful, multi-generational families routinely adopt best practices on maintaining personal relationships, family governance and next-generation development, a new study by the Family Business Network and Family Office Exchange finds.
The study, authored by Dr Dennis Jaffe of Saybrook University, along with Jane Flanagan of FOX, defines and compares the best practices used by 192 of the world’s most successful families, drawn from the two organizations’ pool of members. The study characterized the families as successful due to the high proportion of third- and fourth-generation families present in the sample.
One of its key findings is that successful families make use of best practices “significantly,” and expect to increase their use of them over time. The findings are also consistent across families around the world, with participants drawn from North America (57 per cent), South America, Europe, Asia and Australia/Oceania. They are also consistent across families who still own a legacy business and those who don’t.
In terms of assets, 87 per cent of the participant-families have over $50 million and 23 per cent have over $1 billion. Some 68 per cent still own a legacy business.
“The major insight is that a family has to plan and be conscious not just about their financial safety but also about their family's communication, connection, trust and teamwork,” said Dr Jaffe. “We found in this survey that the most successful families were doing these things; the question now for a family is not whether to do them, but when and how.”
As is often said, the generational transition is a pitfall for many families: the FBN/FOX report cites the Family Firm Institute in saying that only a third of family businesses survive as they cross generations; of those, under 10 per cent manage a successful second transition.
Once a family has sold its legacy business it can still operate as a “family enterprise,” the report lays out, with shared investments and a shared wealth-creation function. Many families, however, “do not survive the generational transition,” because they do not adopt internal governance practices and manage emerging realities.
One of the biggest challenges is the way families sprawl over time to include several related households, so governance practices must counter a tendency toward dissipation and fragmentation. To do so, the paper found that families adopted practices that spanned the inter-connected worlds of family, business and finance.