No family should underestimate the power of purpose to see it through good times and bad and generation to generation, as Scott McCulloch discovers.
What’s our purpose?
It’s a big question but not one that a family business should shirk.
Purpose is one of a handful of key forces that drive family enterprises to achieve multigenerational success.
In other words, how to get to the second generation or to the coveted third as a thriving business.
Entrepreneurial families that have a well-defined purpose are united. And united families have an easier time adapting to change because they place their business interests ahead of their personal interests.
Their purpose is linked to their values, which transcends financial gain.
What exactly is a family purpose? Purpose represents an enduring and stable commitment, shared by multiple family members, to actively engage in making a meaningful difference in some aspect of the world beyond family.
That’s the way Business Families Foundation defines purpose in Family Forward, an innovative learning tool that helps entrepreneurial families improve prospects for longevity by pinpointing their strengths.
A family purpose could mean running a great business and giving back to the community. It could be providing a customer experience that reflects the family’s values. It could be operating a thriving enterprise in harmony with family.
“Successful families must be committed to a set of values beyond just financial gain,” writes family business expert Andrew Keyt in Entrepreneur. “These values typically manifest in the form of a mission or vision statement.”
Family values are the moral principles traditionally upheld and transmitted within a family, such as honesty and loyalty – anything that is permanent and a beacon. They are cultural and pertain to the family’s structure, function, roles, beliefs and ideals.
In strong families, family values are a reassuring yet intangible factor in business decisions. Translating family values into core business values determines how a family runs its business.
A strong family purpose provides a roadmap for the family and the business.
A strong family purpose provides a roadmap for the family and the business. Indeed, family-owned businesses are as strong as the families that run them.
But they tend to have one trait in common – progressively slowing growth after the founder steps down.
PwC found that in the first generation, 42% of businesses have double-digit sales growth. By the fifth generation, only 22% do, and 48% are in the single digits.
Reasons for such slow growth differ by family. But weak growth can often be traced back to one thing: misalignment of leadership around the company’s purpose, vision and values.
“We believe family businesses, built around strong values and with an aspirational purpose, have a
competitive advantage in disruptive times,” says PwC.
“There is an enormous opportunity for family businesses to start generating real gains from their values and purpose by adopting an active approach that turns these into their most valuable asset.”
What’s our purpose? That’s a question every family business should answer early and often.