The Lacoste Story
Sophie Lacoste is the owner of a French luxury ski apparel brand and the granddaughter of René Lacoste, a former tennis champion and founder of the iconic sports brand. Her story goes like this: her father Michel preferred to sell the shares in the Lacoste family empire to Swiss investors. He deemed his daughter incapable of running the business after taking over the company's leadership without his consent. A feud over the years resulted in the sale of a world-famous sports brand and eighty years of family heritage. And undoubtedly in trauma for all family members involved.
This is just one of many examples of family businesses where the third generation loses ownership. Let's assess how to prevent this trend with some practical steps.
Before we look into the specifics of a family business, a first step is assessing the family's heritage. What does the family stand for? What are the values? What unifies the family? All too often, the family leaders skip this step. They may think that family heritage is self-explanatory and that actual and future family members have sufficient guidance to uphold it. The Lacoste story proves them wrong.
The family values assessment is essential. It's about looking back and also at the present to determine the DNA of a family. Family leaders should involve everyone in this process; in particular, younger generations may add a fresh perspective and challenge the status quo for better. External support can guide families through the process and moderate the discussion to reach a broad consensus on essential principles.
Family heritage is comparable to the culture of a business. A top-down approach may not cause the organic transformation of a bottom-up developed and lived culture. The best examples have one element in common: everyone involved is aware of the family's values and heritage and the required actions to preserve it. Culture guides and empowers family members in many ways. Values, identity, and purpose can become the Northstar for people. And a clear distinction between family and family business avoids dependency from the latter.
With a clear understanding of the family heritage, family governance can be defined and is the framework for communication and collaboration. Family governance should capture more than rules regarding the family business. There are academic family governance models, but we believe that a practical approach delivers the best results. With clarity on values and heritage, a first step can be drafting the family's mission statement. What's the purpose and envisaged destiny of the family? How is the family supporting education of the next generation? The mission statement does not need to be necessarily related to the family business and its wealth. It may deal with the more general role of the family in the community. Again, all family members should participate in elaborating on the mission statement to foster unity and support.
With a specific business involved, family governance will clarify roles and decision making. Things can become more formal here with family assemblies for information exchange and decision making and a family council following matters related to the family business and wealth. We recommend regular meetings, a common communication channel, and results-oriented discussions. Whether a family constitution is suitable depends on individual circumstances. We advocate for pragmatic solutions supported by all family members rather than a complex arrangement that lacks support. As a minimum requirement, it should be clear how the family takes decisions and who executes them. This framework can then evolve with family members getting used to it.
Ultimately, the family business needs to support the vision and heritage of the family. As such, it requires a minimum ruleset, e.g., for the business involvement of individual family members with guidance for the younger generation on the requirements for roles in the family business. Also, the distribution of proceeds should be covered to manage expectations and avoid conflicts.
Within a family business, there might be nothing more frustrating for aspiring future leaders than uncertainty about their professional development opportunities. It's essential to have a clear structure and ruleset around career opportunities, the selection process, expectations, compensation, and retirement ages for family members active in the family business. Again, this is work in progress, and the family can elaborate on this over time. The discussion should also cover topics such as external management and potential exits of the family business. It's the focus on uncomfortable issues that will strengthen unity and support within the family. Succession planning is not a legal exercise but a collective vision of the family business's future destiny.
If a family follows the above steps, it lays an excellent foundation for its heritage. Yet today, many entrepreneur families still do not adequately tackle governance and succession and risk following the Lacoste family's destiny. Research showed that a third of the worlds' most prominent single-family offices don't have a succession plan in place. It's precisely the current generation in their 60s and 70s that does not provide for sufficient clarity in the change of control. That the matter is complicated should not justify its avoidance. Instead, to start the discussion and involve all family members will trigger results-driven conversations and often lead to an unexpected and positive dynamic.
Shaping the future
Actively shaping the future of a family based on its values and shared understanding is the first step to ensure that heritage will develop and last over generations. It's also about enabling family members and defining the role of the family's wealth in their lives. There's no need to solve everything at once, and external support can assist in the process and moderate the discussion. It's an ongoing process to leave a lasting legacy, and every family member should have its voice and active part in it. And to close with a quote from Sophie Lacoste: "It's more important to teach the next generation entrepreneurial spirit than transferring the family business to them."