Family Businesses many times operate with an operator’s mindset, focused on achieving operational excellence and hence to keep the system running well. The formula for enduring success for many family business has largely been based on maintaining their competitive edge in business by emphasizing quality and making slow but steady improvements and hence grow within one’s industry. This is normally backed by building loyalty with customers, employees and suppliers and keeping the family at peace and committed to the company. In many instances, this approach of being focused on product and service quality, operational excellence and steady improvement, has in many instances served family businesses well. However in periods of big disruptions or a challenging & fast changing external environment, this is when family businesses face their biggest challenges. They find it hard to quickly make big changes in how and what they did. History shows that due to this, in periods of great disruptions, family businesses with long traditions, just went under and perished. The main reason for this is that businesses find it hard to have a strategic/owner mindset. This is why, as a family business advisor, I normally push family business to have a look around them, as to how their market landscape is changing, how their client’s preferences are changing – to be met with the usual reply “Can’t you see how busy we are with this or that project or dealing with this issue?” A typical operator’s and inward looking mindset, thinking that the world out there will stop changing whilst you are busy with internal operational matters. This is why the accredited course “Award in Leading a Family Business” being offered by EMCS Academy has a whole module on the strategic mindset and proper formulation and execution of Business Strategy.(Registrations for the 2nd Cohort for this accredited course are now open. Please click HERE to Register. We will also help you gain funding for this course)

Family business are unfortunately slow at letting go of practices and activities that have defined them. However what I find really concerning, is that they are really awful at letting go of their losing bets—like the bets they have made on businesses in decline, old practices and technologies, people who are no longer capable in their roles and dying industries. They hang onto these losing propositions way too long. This is a major problem because as the world has shown us in the past 3.5 turbulent years, that if there is anything any business should be good at, is that of letting go of things that aren’t working. This requires family business owners to have all the latest data to actually recognise that they are losing on an investment they have made and understand that they can’t make their bet succeed. This requires gaining altitude, detaching from any singular business or asset and thinking like an owner.

Research clearly shows that those family businesses with an operators’ mindset often are very slow to see these problems. They could simply be too attached to the business, to the tradition or legacy, or to some people. The more I deal on a daily basis with various family businesses, the more I realise how much family businesses need to change their approach in managing change. Today, change has become frantic, fundamental, bumpy, and relentless. Change, it turns out, has changed. While in the past family business had the luxury of taking two or more generations to understand or decide about their mission, company, portfolio, and other enterprise activities, they must now understand all this quickly today. Family businesses no longer have lots of time to gradually figure out how to adapt to changes in their situation. This means that the primary role of any family business owner is to be outward looking and an engine of change.

So, to keep a family business thriving and growing over generations, family businesses actually need two distinct mindsets and family business owners need to appreciate and cultivate both. One is the operators’ mindset, focused on nimble operational excellence—responsive to customer needs while managing costs, innovating, watching competition, adjusting to supply chain issues, creating a responsive and attractive workplace, dealing with the many people and operating issues that appear constantly. To be a good operator you have to be close to the action, stay on your toes, and have your feet on the ground—to mix three useful metaphors. Most family business are superb in all this. I rarely see the need for major improvements in this area. What I see is the great need to balance this mindset with the other needed second mindset. Family business also need to have an owners’/strategic mindset, which is distinct from the operators’ mindset. To have an owners’ mindset you need to gain altitude on your family business and investments, and be good at making five kinds of strategic decisions:

(i) Decisions on Capital Investments – including when to exit bad investments

(ii) Decisions on Key People, including when to change people in key roles

(iii) Setting and Adjusting the culture within the family business

(iv) Designing and setting the right Governance structures in the family business, so that decision making is effective

(v) Set the Strategic Vision with clear targets to be achieved

Some family business owners are capable of having both mindsets. They are very few. The majority of family business owners have just one, which is fine as long as they appreciate the value of the other. What I find rather depressing is when I deal with family business owners focused just on one mindset–usually the operators’ mindset– which is normally the religion of the family business. It is not uncommon that when I point out that for example, the industry the family business operates in is maturing or being disrupted and that family business can’t succeed if swift change does not take place or that it may be time to sell or exit a certain market – I sometimes get looked at as being some sort of heretic.

In conclusion, more than ever before, the success and survival of any family business requires good decisions at the owner/strategic level. Family business owners must be able to make timely and important decisions that that owners must make. As I keep telling family business owners – whether you like it or not, these decisions will be upon you sooner rather than later and will materially impact the trajectory of your family business and your assets. It is time for family business owners to start thinking like owners.