“Family businesses that manage these five innate advantages are well placed to make the 21st century a family business century.”  This assertion is the conclusion of a Harvard Business Review* article I recently discovered.  So, what are these advantages and is your business prepared to fully benefit from them?  Here’s a brief summary of each along with the questions businesses and families need to ask themselves.

1. “Talent: From Mass Employment to a Higher Calling”:  Where the last century’s employees sought stability, today’s work force rank engagement and the company’s mission and values above job security and a good salary.  Family businesses imbue their companies with the family’s values and often engage their staff as part of the family.

But how do you continue to convey this as the company grows beyond when the owner(s) know everyone personally?  And as the family grows, how do you keep the expanding number of shareholders engaged and in agreement with these values?

2. “Investment: From Other People’s Money to Captive Capital”:   Competing forces in the stock market translates into short-term investments with a focus on quarterly earnings reports.  Family businesses maintain their investment in the company and focus on the long-term prosperity of their family.

What unexpected events could divert capital out of your family’s company?  As the number of shareholders grows, how do you keep ownership in the family?

3. “Reputation: From Profit Motive to Sustainable Footprint”:   Giving back to the community builds public goodwill which increases sales and becomes crucial when negative events or reviews go viral.  (Note the article’s use of “sustainable footprint” includes all benevolent actions.) Management at public companies are not usually rewarded for their “social responsibility”.  Family businesses, on the other hand, often invest in their community both economically and through participation in philanthropic activities.

How do you keep multiple generations committed to the same sense of giving back as their parents and grandparents?

4. “Organization: From Managing Complexity to Rapid Response”:    The same structure that created stability in the past, makes public companies slow to adapt to today’s rapidly changing environment.  The privately held family firm maintains flatter structures with fewer decision makers who are experienced at reacting to these changing market forces.

The challenge for family managers is remaining united, not delivering conflicting messages in response to every perceived emergency and the changing whims of shareholders.

5. “Governance: From Separation of Powers to Engaged Owners”:   Executives within public companies often have different priorities than the majority of their shareholders. In contrast, management of family-owned businesses are most often the primary owners.  Even when not active in the company, familial ties keep shareholder engaged.

This can be a blessing and a curse.  Engagement works when not accompanied by the emotions often associated with families.  And, what happens when the priorities of family members diverge?

Conclusion: Prepare Your Family Business

This is the century of the family business. But the company and the family have to be prepared.  At the heart of that preparation are Governance Policies for both. Here are some actions you can take to fully leverage the benefits of these five advantages:

1 Talent: A Higher Calling:   Most owners recognize mission and core values statements as the compass which keeps their company on the right path. Distinct family mission and value statements have the same benefit, keeping family members connected, engaged and moving together for their common well-being.  The challenge is putting them in writing and keeping them relevant across generations.

2.Investment: Captive Capital:   While no one wants to discuss it, the reality is the unexpected death of a major shareholder can drain a company’s and a family’s resources. Thus, the importance of a current and adequately funded buy-sell agreement.  A properly thought out buy-sell agreement also protects against rogue family members selling shares to unknown outsiders.

3. Reputation: Sustainable Footprint:   Family value statements should connect the family to community and other philanthropic causes. This has the added advantage of reinforcing the bond within the family.

4 & 5. Organization: Rapid Response & Governance: Engaged Owners:   Timely, consistence decisions are the result of clearly defined and distinct leadership roles. Within the company, the organizational chart along with full and current job descriptions provide clarity on who makes decisions at all levels of the company. Policies also need to elucidate the role of shareholders in the decision-making process.

Taking the time to implement these actions may seem off mission for you and your company. However, taking actions prepares you to avoid future distractions and keeps you on mission.

*I highly recommend subscribing to HBS@Work which is Harvard Business School’s Executive Education e-newsletter and often includes Harvard Business Review articles covering many topics of interest to owners, CEOs and others in business.