Achieving Innovation in Family Business To Stay Relevant
With many second generation family businesses coming into the fore in Malaysia, competition is as intense as never before. The strength of family businesses lies in keeping the family together. It is therefore crucial to ensure the next generation find their unique place within the business as they are the ones who can push the company’s innovation agenda. The need for quality talent is a given in today’s volatile environment. The brand of the company can be crucial in ensuring that the firm secures the best and most appropriate talent for the business. Everything else flows from that.
The survey indicates that Malaysian family businesses know what it takes to be innovative.Among the factors cited in their top 5 personaland business goals to drive growth; “to professionalise the business, diversify into a different business sector, attract high quality talent,moveintothedigitaleconomy/e-commerce, establish branding.” However, it remains to be seen if the environment within the family business, tone-from-the-top, and mindset within the family business allows such goals to be achieved. For example, 61% of the respondents say they don’t have non-family members on their Board of Directors. The question then lies if the family member Directors are capable enough to generate innovative ideas? Only 19% have a performance appraisal system in place for family members. If there is no performance appraisal in place, then how would employees know how family members performance is measured and rewarded accordingly? It could well be the Company’s informal appraisal system for family members works well but it may be perceived differently by employees.
Certain characteristics of family firms can work against business innovation. They include:
Limited exposure to innovative ideas from other industries, particularly in families where the business leaders have not worked anywhere else;
A lack of willingness to adopt ideas from outside the business due to the feeling that family members, who may have been in the business for decades, know more than anyone else about what it takes to succeed;
A limited desire to take risks because all of the family’s eggs are in one basket (solely invested in the business).
However, family businesses can take heart in knowing that decisions can be made more quicklyin an environment where management andownership generally overlap to bring innovations to market quickly. Innovation in family businesses does not need to be tied to the size of the company; more importantly, innovation should be driven by the management’s knowledge and creativity, and the owners’ passion to succeed.
credit to ACCCIM Family Business Survey Report 2018, ACCIM & PWC