Scott McCulloch explores the latest thinking on why purpose matters to the wellbeing and economic future of enterprising families.
“A family business without a common purpose will not survive.”
When I first read that assertion by Peter May, a family business consultant and strategic advisor to PwC’s family business practice in Germany, I thought now there’s a pundit who’s willing to stick his neck out.
May’s remarks, which can be found in PwC’s 2018 Global Family Business Survey, are hardly surprising given the accelerating pace of industry lifecycles.
The rate of business change is so fast now that entrepreneurial families, who commonly take a long-term view of their enterprises, need to prepare more often for more frequent change.
Industry lifecycles are shortening. In any ten-year period (some experts say less), a family firm will make at least two big changes to the business, according to family enterprise authority John Davis.
Achieving Generational Purpose
It could be argued that entrepreneurial families need to know what they’re doing and why they’re doing it faster than ever. Business family purpose matters.
“Family businesses must be clear,” May says. “What is our reason to stand together for the next 20 to 30 years and the next generation to come?”
It’s a great question. And May isn’t the only family business commentator who holds this view.
We’re hearing more about purpose these days as an intangible driver of profit. There are those who believe doing good for, say, a community can help strengthen a family enterprise.
Yet it’s counterintuitive to not put shareholders first. After all, shareholder primacy has defined capitalism for decades.
Profit and Purpose
When Paul Polman, the former Procter & Gamble president for Western Europe, asked: “Why should the citizens of this world keep companies around whose sole purpose is the enrichment of a few people?” he joined a chorus of like-minded reformists.
But even the staunchest supporters of purposeful capitalism admit that hurdles exist. How do you measure something as vague as purpose, which can include treating suppliers fairly to cutting carbon emissions?
How do you measure purpose?
Indeed, what is business family purpose? Family Forward, Business Families Foundation’s family learning tool, defines it as “an enduring commitment shared by family members to engage in making a meaningful difference in some aspect of the world beyond family.”
A clear purpose is fundamental to family businesses, says Alexandra Sharp, head of Family Enterprise Consulting, at Deloitte UK. “Those with the strongest sense of purpose are often the most successful – achieving profit with purpose.”
Is that the secret recipe? Single-minded clarity? As New York University Professor Ido Aharoni explains in this video, purpose comes in many forms.
“Purpose has to be tied to goodness,” he says. “People think that the purpose of life is to make money or the purpose of life is to design beautiful things.”
Aharoni, who is a 25-year veteran of Israel’s Foreign Service, says when we talk about purpose, in the social and economic context, we’re usually referring to the promotion of goodness – things that are responsible, that make a positive contribution to the world.
“Purpose is the ability to leave the world a better place for the generations that will come next. It’s not just enough to make money, it’s more important to make money and also have an impact,” Aharoni says.
“Social impact, cultural impact, political impact. There are so many things that we can do with the opportunity given to us to make things happen with our resources, with our energy, with our outreach, with our connections and so on.”
Having a strong sense of business family purpose is akin to having a full tank of high-octane fuel, say Canadian family business insiders.
“I love the concept of knowing your purpose,” says legacy coach and family advisor Danielle Saputo. “Knowing your ‘why’ propels you forward in whatever endeavor you want to move forward on.”
She adds: “When it comes to a family enterprise, purpose is even stronger when it’s co-created by multiple generations.”
In a larger family business that often takes the form of philanthropic initiatives and impact investments.
One of the objectives of BFF’s Engaged Philanthropy and Impact Investing course is to increase awareness of the unifying forces of engaged philanthropy.
Learn how our upcoming course Engaged Philanthropy and Impact Investing can enhance your family’s purpose.
A united family is a purposeful family, say commentators familiar with entrepreneurial family cultures. In addition to the owners’ motivations, a family’s culture can have a powerful eﬀect on how its business operates.
Family enterprise consultant John Neff believes a company’s culture starts with the founder’s vision and values, which can create a strong sense of shared purpose and identity – keys to success in any business, family-owned or not.
Family businesses tend to stick to the founder’s original purpose, which “can linger into future generations” even after the founder’s death, Neff asserts in a Case Western Reserve University research paper.
Such a strong cultural foundation can have a positive eﬀect on the performance of a family-owned business, but it needs to be ﬂexible, he warns.
“Next-generation owners and managers will bring their own talents and perspectives to the leadership role, and the culture that can adapt to the new style will be more likely to thrive.”
Is your business family purpose clearly defined? It could propel your enterprise to greater heights.