Invest lots of time in the next generation. Encourage innovation, even if this sometimes leads to mistakes and failures. And attract and keep good people from outside the family.
These are some of the tips for running successful family firms from six former winners of the IMD-Lombard Odier Global Family Business Award. Chairmen and top executives from Puig, Ermenegildo Zegna, The Murugappa Group, The Bonnier Group, Firmenich and The Bel Group shared their insights during a panel discussion at the two-day IMD event to celebrate 25 years of family business research and education at the school last year.
The next generation
Much of the conversation focused on the challenge of bringing the next generation into a family business, and the implications for both talent management and shareholder structures. This challenge is probably greater if the new generation has had a different upbringing to previous ones.
"The biggest challenge for us is the next (fifth) generation," said Subbiah Murugappa (third generation) from Indian conglomerate The Murugappa Group.
While the group remains heavily influenced by its founder's values, the majority of the family's fifth generation has studied in western countries. Possible cultural tensions will therefore need to be managed carefully when this generation takes over from the current fourth-generation management, Murugappa said.
Similarly, Paolo Zegna from Italian fashion house Ermenegildo Zegna said the current 18 to 34-year-old members of the family are far more spread out than earlier generations. Some are studying in the UK, France and the US, and others are in India.
"We try to transmit the same sense of unity our generation had, to prepare them as well as possible to join the company, and to see what the best position would be for them to start," Zegna said.
Mariano Puig, of Spanish fashion and fragrance company Puig, highlighted the importance of training the fourth generation of his family to be good, responsible shareholders, whether or not they become executives in the firm.
The additional shareholders resulting from generational shifts also need to be carefully managed, said Hans-Jacob Bonnier, a member of the sixth generation of Swedish media and publishing company Bonnier Group. He recalled that it took the group six years during the 1990s to reach a new agreement among its 76 shareholders at the time.
This view was echoed by Bernard Firmenich from Firmenich, the Swiss fragrance and flavor producer. The company is 100 per cent family-owned and has 42 shareholders.
"If your company does a shareholder agreement, you should start early. These agreements take time because people have different needs and wishes," Firmenich said.
Panelists also emphasized the importance for family businesses of taking risks in order to stay fresh and competitive.
"We encourage failure, because without that philosophy you can't be good at innovation," said Antoine Fiévet from French cheese producer Bel Group. "And we always change our organization when results are good, because it keeps the momentum going."
Likewise, Paolo Zegna said his company tries to be "continuously innovative" in its approach to the market. "We've not been afraid to make mistakes, because this allows us to move around continuously," he said.
Looking outside the family
Finally, there was a lively discussion about how to attract and keep good people from outside the family in management positions.
Marc Puig, Chairman and CEO of Puig, said giving your best people ambitious and exciting projects can help to stop them getting poached by competitors. Bonnier said the key is to give non-family members independence and responsibility, such as the chance to run one of his group's 350 brands. Fiévet said "you need to give them space," adding that family firms should hire non-family members based on their fit with family values rather than specific skills, and then find a natural place for them in the company.
Panelists also underlined the importance of having non-family members on boards as a counterbalancing measure within a family firm's overall governance structure.
The 25th anniversary event, which was organized by the IMD Global Family Business Center, attracted more than 150 leading global family businesses from 30 countries.