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The family business organisation of the future

Dr Pierre Jean Everaert  is the chairman of the board of Interbrew SA, and has been chairman of and served on many other boards around the world. He is also a professor at the Vlerick School of Business of the University of Leuven-Gent and a guest lecturer at several business schools in Asia and South America.

The processes of conducting business have changed beyond recognition in recent years. Family businesses need to embrace communication and access to information for future success

Peter Drucker, recognised as the father of modern management, saw the need to reflect on the process of conducting business as we approached the millennium.

Changes in fundamental business trends require new company systems and procedures, which themselves lead to new methods of working and, ultimately, to reinventing the company itself. Professor Drucker saw that new trends were evolving in the late 1990s and recommended that we change. In 1997 he told us to prepare ourselves to update our corporate structures. The same should be done for family businesses, as they are far from immune from these trends.

Information and communication
The most far-reaching change in the pre- and post-millennium years is access to information. The importance of this is equalled by the importance of having an unlimited capacity to compute the information, to manipulate the information and to guard against the inherent danger of failing expertise by those who work with the information. The most accepted change is the way we communicate: letters and faxes are out; e-mail and SMS are in.

Communicating on the new highway has changed the way we work, the way we live and given us a new identity: the URL. We have switched from meeting face to face to remote contacts in virtual meetings; from using pen and pencil documents to messaging on screens, PDAs and even cell phones. The information unfolds in real time, using text, graphics and sound. In using these technologies we trade commodities, products and services that exist only on paper.

This process has proved to be a metamorphosis, not an evolution. As such, it is a massive amount of change for any board member to absorb, family or not, executive or non-executive. It is an even bigger challenge for older individuals, unless they surround themselves with competent staff and current information in order to handle these issues.
 
Plan for the future
In order to plan for the future, a family business executive should consider how to assess his company's position in the industry, in the market and from a manpower perspective.

A traditional family business acquires expertise in one type of product, accumulated over many years and several generations. Senior family executives lack knowledge of technologies that change the nature of their product. They have not stayed ahead of the pack in their industry. But do they know it?

Senior family executives need personal training in various fields of business, as well as the means to acquire innovative product know-how. Shareholders and employees alike wonder: (a) is our product line still attractive?; (b) are we competitive in value?; and (c) are we an industry of the future or are we the typewriter ribbons of the past?

Furthermore, if the company is not state of the art and the competitor's way-to-market has already gone digital, even more delicate questions could arise: will there be redundancies or will learned skills and specialist employees be hired from the outside?

Maybe partnerships or strategic alliances will be considered with potential closures of factories and office mergers! What is next?

Establishing a list of challenges with appropriate corrections is a tall order for any executive. It requires a high degree of sophistication. This is the time to call in consultants to help in the analytical process and write a plan of action. 

Keeping an open mind
To achieve future success, family businesses need to focus not only on their business and the people involved in it, but also on the tools that the business and employees use. Keeping an open mind is of utmost importance.

Standard pre-millennium business processes, such as market research, end user profiling, media selection and customer service, are now simply turned around – from jotting down answers in consumer surveys to extrapolating purchasing patterns from sophisticated data banks.

Today at the point of sale, we sell instant customisation rather than a wide and deep product range. We flip from one configuration to another, instantly offering multiple choices. In our factories, we refer to "postponement" as stopping the manufacturing process until customer demand, brought in via the internet.

Unfortunately, people do not flip from black to white in their thinking. The workforce needs time to assimilate change and adapt their rhythm of execution. It takes smart communication, step-by-step implementation and time to change basic factory and office processes.

The era of information technology has invaded the workplace. The faster pace of knowing, with instant "what-ifs" has permitted family businesses, if they are equipped to walk the digital highway, to speed up. If businesses are not equipped, the same phenomenon will cause them to grind to a virtual halt. Thus, we must reinvent ourselves, recreate our performance environment and adapt our work habits.

Knowledge management as a business tool
The good news is that there is "a family organisation of the future", which will meet these needs. It just needs to be unveiled at your place of business. A sign of the times is the example of four-year-old children who have not yet mastered the alphabet but expertly surf the net. A combination of letters and colours, moving shapes and sounds creates knowledge and retention. They are interactive kids.

In a related process, appropriate combinations of multiple business elements produce know-how at the workplace. For instance, employees might assimilate facts and figures very slowly, yet they are able to learn a specific business arena at high speed.

What this tells us is that we need to let this vibrant form of information stream enter "yesteryear" companies. Let the young generation define their database sources and the types of infor­mation they need to reposition the company.

In other words, let them own the system. Moreover, database management is not an issue of "if", but "when". The ability to handle large amounts of pertinent
data is an acquired skill – it cannot be improvised.

The interactive man at the top
Starting the transformation processes on time and monitoring execution are prerequisites to the successful comeback of family businesses. People are emotional; machines are not! Emotions are not only permitted, but needed for change to succeed – so long as these emotions are positive contributors to the awareness of the required change. The finish line must be kept in sight and the date of completion identified.

With this heightened abundance of change and information, a new form of leadership of family businesses is required.

The CEO has a role model function he cannot ignore. The classic function description of the CEO includes six specific areas of simultaneous performance:

Executive Officer: the unchallenged boss in the corporation, fully accountable to himself, company employees, shareholders, stakeholders and the financial community;

Ethics Observer: lives by the rules of ethics, enforces them in the company, patrols for infractions relentlessly, sanctions any deviation or attempt thereof, and reports on the findings at the audit committee, the full board and the annual meeting of shareholders;

Emotion Manager: gives advice to em-ployees who bring their emotions to work; the secret is to handle these people with dignity to gain their trust and respect;

Education Provider: provides employees with the tools necessary to perform their tasks using sophisticated means wherever in the world;

Excellence Achiever: because the sum of little victories is bigger than one large single achievement, the CEO is expected to be the number one achiever but cannot be the only achiever; and

Emancipation Leader: growing up in the corporate world parallels the ongoing acquisition of social and pure human skills; there is nothing wrong with the boss growing up with the company, leading the parade.  

The modern description, in post-millennium corporate governance, simply adds the information dimension to this – the CEO must perform the six "Es" much more interactively.

The danger of entering the high-speed lane is that the "achievers" can become "deceivers" and "honest" bosses can become "crooks". It happens in today's business world, where "sustainable" becomes "vulnerable" and "severance", which was meant to be "life after death", becomes "luxury after retreat". To avoid this, the CEO of a family business must become extremely interactive to have the best information at all times. When traveling at high speed, you need to frequently check your gauges and surroundings to avoid disaster.

Remuneration and reward
Lastly, family businesses, like most every company, are prey to trends in remuneration and reward. There are now new expectations for remuneration. Employees at ever more levels in the corporation, not just the top, wish to participate in the success of the enterprise.

Bonuses have been around for many years but are no longer considered adequate compensation for extra performance. Today, stock options or stock certificates are added as part of the overall remuneration package that includes a base salary, multiple bonuses and various perks.

Family businesses are not always in favour of these packages because of the overall dilution effect. Yet, in our current environment profit sharing and personal wealth creation plans are deal-breakers for employment if they are not available.

The take-aways
It takes investments in both people and equipment to avoid repeating the mistakes of the past. It takes time to reposition a family business so tempo is in order. And most of all, it takes "a man with the flag up front": a well-equipped leader – a CEO-2002.

Whether the CEO-2002 should be family or non-family remains an open question. In any case, the leaders of tomorrow will need to thrive in an interactive business environment to fulfill their duties in the new millennium.

Note: iAnalysis, iStructure and iPlan are copyright© protected and can be used only with the written permission of the author.

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