Soriano: Founders must be purpose driven

Among all the values that family organizations embrace while navigating complexities, a “shared purpose” comes to mind. It is one super value that differentiates family-owned businesses from a non-family one and by default, stands out as a major difference, along with family unity and ownership transfer. According to Carlos Mas Ivars of IE University, “Families in business always have an element of legacy in both action and decision making, and the power of inherent purpose is fundamental to a family in business–not only to the performance of that company but to its very survival, and this survival aspect is the main driver of actions taken by the company.”

Deloitte partner Alexandra Sharpe highlighted that, “The most successful family enterprises around the world manage to unite the constituent individuals, family and business and coalesce them around a common sense of purpose. Clarity and unity of purpose brings great strength. Of course, this is easier said than done, and it can be incredibly hard for a multi-generational family in business together to identify a shared purpose, let alone articulate it.”

Founders must be purpose driven

As a family in business develops over time, so must its purpose. There is no doubt that in the founder stage, purpose and action is directly correlated. The desire and dogged determination of the visionary to succeed and perpetuate the business becomes a powerful and compelling driver that permeates across all the family and business ecosystem, often at the expense of intra-family relationships. As Ivars highlighted, “There is usually a very strong identity of ownership and management of the day-by-day business. The founder’s purpose naturally leads to every aspect of the business and the founder is directly involved in decision making. Formalizing the purpose of the company is not a mission critical at this stage because the founder embodies his or her values and is likely to continuously and consistently state the purpose of the company in various manners.”

For as long as the founder is laser-focused, intense, purposive and healthy, the business will thrive and march its way to the next phase of the family life cycle, the sibling partnership.

Next generation leaders

In this particular stage, this purposive value espoused by the founder remains embedded in the company’s DNA but a word of caution, generational change (lifestyle needs, in-law influence ) may still pose issues for many family firms and not all siblings will share the same passion and interest in the business. For some, they may wish to pursue their personal aspirations unrelated to the business (art and music). For others there is an unending search for meaning in their lives. But for siblings that are active in the business, it is natural for them to have divergent views related to how the business should move forward. They may have the same set of values but different visions for the future. That is why it is imperative that communication, knowledge, transparency and sharing of information among siblings/shareholders are amplified as potential minefields like unhealthy rivalry, past history issues, in-law influence, personality differences can be triggering events that can disrupt the much coveted shared purpose.

To address and anticipate a higher risk of conflict, founder-offspring collaboration must happen as soon as possible. This is where governance agreements ( Family Charter/Constitution Code of Leadership Conduct and Shareholders Agreement) highlighting the family’s shared values and business-related policies, the recording of family position on business, moral, ethical, and behavioral issues are codified, agreed upon and documented.

If I raised the spectre of conflict among siblings, we should further brace ourselves for an even challenging cousin consortium phase. In my experience, the most difficult and highly energized phase lies in the succeeding generation. I will write about this important cousin consortium phase in the next article.