Make sure the family business does not fail for family reasons
Why is that and what can you do to avoid it?
Ireland has the fastest GDP growth in the euro area, unemployment is falling and consumer confidence is returning. PwC’s latest survey of family businesses has shown this positive impact: An overwhelming majority (86%) of Irish entrepreneurs expect growth over the next five years, including 10% looking for growth dynamic.
However, global megatrends such as the digital revolution are making the business landscape more volatile and competitive than ever before. Family businesses are aware of this and react accordingly. They install new IT systems, streamline processes, strengthen boards, and deploy the skills they need to professionalise their operations.
However, as this survey among family businesses shows, the professionalization of the company is not enough. The key is the professionalization of the family and the business – the “heart” and the “head”. It’s about family governance and corporate governance. Family businesses need to consider all aspects of the family’s interaction with the company and hold its executives accountable. And family members must learn to be good owners and, if not, good managers.
It means creating a strong framework for the family’s interactions with the company. This includes everything from decision-making, communication, dividend policy to succession planning.
These are often thorny problems that can not be avoided. So what is the approach? Working with a variety of family businesses, we’ve put together some roadmap considerations to help the family become the company’s strength.
1. Check the current governance
Our survey shows that the governance of families and businesses continues to improve. However, governance needs to be reviewed on a regular basis to ensure that it is appropriate and companies must evaluate:
How family members interact with each other and with the company.
2. Discuss and approve future plans and intentions
According to the book Preparing Heirs written by Roy Williams and Vic Preisser, 70% of intergenerational prosperity transitions fail, many of which are due solely to a lack of openness and transparency. It is therefore important to open discussions and establish general frameworks for the future of the family’s assets, business and role.
3. Define the roles and responsibilities of the family
To professionalize the family, it is necessary to set up processes that determine the relationship of the family to the company in order to protect their interests and to ensure their survival. It is therefore important that the following elements are clearly defined:
Family roles – Do the right people have the right roles, do they have the right experience and what are their goals?
Decision making – does that cover both business and family, and is it transparent and fair?
Responsibility – who is responsible to whom and for what?
4. Create a conflict management strategy
The strengths and weaknesses of a family business are expressed perfectly: the family. Working with relationships can generate a higher level of trust and commitment, but can also lead to resentment and open conflict, as individuals struggle to separate “head” and “heart.”
This year’s survey shows that a growing number of family businesses have established dispute resolution mechanisms, with over three quarters (78%) of Irish family businesses having at least one litigation. Great, but they are adapted to the needs and cover the following areas:
Third-party broadcast and mediation forums
Passive commitment of the members
Reinvestment versus extraction
Original constitution and justice obligations?
5. Plan the succession
The survey found that nearly half (45%) of Irish family businesses have succession plans for some, if not all, of leadership positions, but only one in ten respondents has a robust and documented process. An unpublished plan is just an idea. It is a problem that family businesses have to deal with with the same commitment and energy to professionalize other aspects of the business.
In our survey, three main topics were highlighted: the generational gap, the credibility gap and the communication gap. Therefore, a successful successor plan should discuss the following openly and give instructions:
Integration of the next generation
How the older generation keeps a positive influence
Development and support of the next generation.
With more than 25 years of family business experience, the only way to make the industry even more successful is to professionalize the family and the company and develop a model based on the “family business” model based on “the company”. Family. “