Saturday, June 4, 2011

466. Family firms must plan their succession well & UVP

The founder of a family business must be able to plan his succession well. Otherwise, family feuds ruin the business. There will be no business continuity during the critical period after the founder dies.

What can be done?

1. Systematic and organised handing of control to the next generation to prevent family feuds.

2. The founder has to resolve some conflicts. One big conflict is between the family's welfare and the company's value. The patriarch is responsible for finding a job for the adult children of the family. If they are capable, they will grow the business. If they are not capable, they are going to hurt the business. If the patriarch does not put the son in the company, the wife will not be happy. So, there are dilemmas for the founder.

3. If the company has a lack of talent, it can trust outsiders to hold the fort before the children can take over. But it has to offer good pay and an equal chance for promotion to attract talent. This may not mean that "loyalty can be bought" as good talent may set up a competitive firm.

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Enterprises must be more innovative and continuously offer a strong and unique value proposition (UVP) to their clients to stay ahead of competition. How to do it? That is the question hard to answer.

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