Key insights from the Summit includes:

Founders, Corporate Governance and Family Business
The intention of most founders when they start their business is to make money, make ends meet, be socially acceptable, and be able to do whatever they want. It becomes a struggle when the children come into the business. The rising generation comes with new ideas and new technologies that the Matriarch or Patriarch are not familiar with, hence they resist the changes as they want to maintain control. There are disruptions that they are not ready to entertain.

Founders do not entertain disruptions. They simply want stability. They do not want their business to be disrupted and they are mostly not concerned with corporate governance. This is because the business was set up to meet their needs and not necessarily for longevity. This reality is usually a battle for the rising generation, especially the second generation as they come into the family wealth and business.

The Rising Generation, Founders and Corporate Governance
Most founders, especially wealth creators are not attune with corporate governance. They are mostly focused on building the business. And so it is left to the next generation to put governance structures into place. The next Generation need to prove their mettle and explain, encourage, nudge, research and come up with ideas that is meaningful to the Patriarch and Matriarch.

The rising generation coming into the business has to understand the dynamics of the business and the role culture plays. The traditional African founder might not want to feel like they are losing control. It is important for the rising generation to understand that it is work in progress, hence Incorporating corporate governance into the business might take some time. 

Rising generation should take time to explain to the Founder the need for governance and build trust. There is need to demonstrate some tangible benefits. Hence it is important to acknowledge that this might take years and several conversations before adoption by the Founder. Continous communication is important.

Trust Between Family Members
This is premised on communication between family members. There must be open communication and transparency. Everyone family member in the business must also prove that they are willing to be educated and put in the work.

It is also wise for the younger generation to show that they are not in the family business simply to take over control but most important to provide solutions to problems, bring on board innovative ideas, and suggest how technology, collaboration and partnerships can improve the fortunes of the family business.

From Entrepreneurship to Family Business
The move from being an entrepreneur with a business to becoming a multigenerational family business is not sudden. 

The first generation (founder) start by doing something wonderful. They set up a successful business and make more money than they need. The business becomes a family business with the second and third generations who decide to create a great family and invest in the future.

The first generation do not possess this skill. They are mostly individualistic and have no idea of the collective. They do not really see the future, they mostly would want to clone themselves in the next generation. 

However, the second and third generations are usually the generation with a collective shared purpose and they are intentional to invest in the rising generation so everyone in the family can thrive. 

While first-generation Founder ‘builders’ question is “How can we create wealth?”, the overriding question for the second and third becomes “What is our wealth for?”. Hence, they develop a culture where everyone collaborates by working together. At this stage, there are many leaders instead of one(the Founder). There is a mix of family leaders, business leaders, and philanthropy leaders which results in cultural shifts and dynamics.

Global Cultures and Its impact in Family Enterprises
First, there is the individualistic culture which is prevalent in the Western world. In this culture, personal identity is strong and self-worth is based on personal dignity. People are considered as equals with individual rights above the family. Everyone should be heard in decision making. Shared leadership is also possible and encouraged within a family.

Then there is the collective harmony culture prevalent in Asia. Here, self-worth is collectively determined and maintained. The family and community come first and trust is built on relationships.

Lastly, there is the honour culture common where self-worth is based on reputation, maintaining honour of self and family. Trust is based on relationships and networks.

It is worthy of note that the rising generation are experiencing these different cultures, they are learning and marrying from them so there are cross-cultural families and dynamics. It is thus important to be conscious about other cultures and its impact in the family and the family business.

Building Resilience in Family Business
The first thing to note is that family members who want out of the family business should be allowed to leave. This will ensure that the family members who remain in the business are by choice and everyone is aligned with a shared purpose and ready to be responsible to the business.

Building resilience in Family Enterprises involves understanding the following stages in the growth of the family wealth and business:

1. Harvesting:
   Harvesting means that as the business thrives, money is taken out of the family business to create family wealth. There is progression from being a business operating family to being a financially endowed family that enjoys the resources required to meet its needs and wants.
   
   
2. Pruning:
   People who want out of the family business should be allowed to leave. This is the pruning process. Family disputes and fights are often about people who do not want to be partners. It is important not to keep people in the business as prisoners.
   
   
3. Diversifying and Grounding:
   Over time, as a family grows and its business thrives, the family members do not want to depend on just one legacy business or investment, hence they begin to have shared business objectives. They develop an investment philosophy, buy other businesses consolidate across businesses, jurisdictions and asset classes. They can create a family office such that these is a coordinated approach and complementary services.
   
   
4. Culture/Shared Identity:
   Each succeeding generation has more people who question “Who are we?”, “what do we stand for?” “What are our values?”. As a result, having a shared identity serves as the glue that keeps the family together.

Families evolve and in each succeeding generation there is a new dynamic, hence the family has to reinvent itself to manage what it is now and evolving into, not what it was in the past.

Family Governance and Shared Ownership
Governance is a solution to a problem. It can be tailored to the family’s unique circumstances. The older generation sometimes have all the information and they need to share with the younger generation. Families need to come together to create agreements, family council or assembly that can reflect everyone’s roles.

To create a sustainable governance structure, there is also a need for roles and responsibilities to be clearly earmarked and for everyone to understand their roles.

The rising generation has to be brought up with an owner’s mindset. Hence, building the entrepreneurial mindset from that of an owner operator is invaluable in multigenerational wealthy families.

Two-thirds of innovation for the family business will come from the rising generation, consequently they need the support of the older generation. This way, family businesses are set with the human capital, financial capital, network and support they need to be resilient across generations.

Click here to see more highlights from the AFBS 2024 edition.