Buyers wait in line as the client’s capacity is limited due to the explosion of the virus in the market basket … [+]
When it comes to maintaining wealth and influence between generations, family enterprises face a unique set of challenges. Some have bloomed for centuries, evolving in the dynasty, while others are destroyed within a generation or two. The difference is often the way they see themselves-not like businesses, but as long-term wealth administrators.
A recent article from the Family Firm Institute, Holding Family Heritage: Which Family Enterprises can learn from asset management firmsBy Dr. Isabella Otero offers an intriguing perspective. He argues that family -owned businesses should take a page from assets management firms by adopting a structured, professional approach. Instead of looking at themselves as a single operating company, they need to think about a property portfolio, managed with a focus on long -term sustainability.
This implies relocation from the founder -led decision -making to government structures that balance business and family interests. Professionalization of leadership, behavior of external advisers and maintaining a disciplined approach to capital allocation are all major strategies. The basic message is clear: Families that run their enterprises as investment firms have a better chance of maintaining wealth and impact for future generations.
It is a compelling argument, but does it reflect the reality of family -owned businesses?
Family business versus business family
In their book Business success planning and beyondDirk R. Dreux IV and Joe M. Goodman argued that not all family enterprises follow the same trajectory. Some remain family-owned businesses (FOB)-where emotional ties, inheritance and control exceed financial considerations. Others evolve into businesses owned by a family (BOF) where performance, investment return and professionalization become the guidance principles.
The difference is more than semantics. A family -owned business gives preference to control over capital profits. Strategic objectives are often intertwined with the identity of the family that support relatives through employment, maintaining community impact and ensuring continuity of ownership. These businesses tend to resist external influence and change, often to their detriment.
Take the case of the market basket, where Arthur T. Demouula built a fierce loyal employee and customer base. The competitive advantage of the company was not only its low prices were the relationship that Arthur T. cultivated, ensuring that the family’s legacy remains essential to business.
On the other hand, his cousin, Arthur S. Demoulas, saw the market basket more as a business owned by a family. Its purpose was to maximize the return of investments, whether through dividend, capital earnings or reinvestment in new enterprises. Decision -making must be based on performance rather than inheritance, and succession approaches the same logic as any corporate transition. He did not see their business as a single entity to protect at all costs. Instead, they treat it as a component of a greater financial strategy – directing their possessions, bringing out external management and giving priority to profitability.
The result was when Arthur refused to increase distributions for shareholders, Arthur S. had removed it from market basket management, generating such a reaction that within weeks Arthur S. had to accept and sell his interest in the company to Arthur T. or faces bankruptcy.
True Challenge: Finding balance
The suggestion of the Family Firm Institute to adopt a wealth management mentality is well compatible with the BOF access, where professionalization and governance have advantages. But for many family businesses, such as market basket, this change is said more easily than done.
A family enterprise that has flourished for generations is likely to have done so because of its family -led culture, not despite this. Presenting external management or applying solid investment principles can create friction, especially when the family sees business as more than just an asset.
The challenge is not the choice between professionalism and tradition – is to find a balance between the two. The most sustainable companies of the family understand that while relationships and inheritance are important, thus make efficiency and suitability. They know when they keep control and when they go back in favor of professional management.
For those seeking to ensure that their family business survives beyond the current generation, the main question is not only, “How do we keep the business?” But on the contrary, “How do we maintain the influence and wealth of the family over time?”
Some will do so by modernizing their access, treating their properties as an investment portfolio. Others will double in their identity -driven strategy, ensuring that their business remains an essential part of the family legacy. However, the smartest families will make them both – adapting to where it is necessary while maintaining the values that make their enterprise successful in the first place.