The operation of family businesses involves a mixture of business and family, business decisions and more personal emotions. For this reason, they face particular challenges, different from those of other companies.
These are the four main challenges for companies where a family owns the business and has both management and executive functions.
One of the main advantages of the family business is that it can maintain and increase its value within the family over the long term, over generations.
If all goes well, the successive generations have different roles in the company’s development: the first is creative, the second institutionalising and the third expansive. But achieving this evolution of constant growth is not easy. Some studies put the percentage of family businesses that do not make it beyond the third generation at 80%.
Ideally, it is the founder of the family business himself who starts planning the succession, progressively delegating his functions in order to avoid excessive dependence on him. The process of generational handover at the top of the organisation needs time, training and know-how. This transition should last at least ten years, allowing sufficient time for the preparation of the new leader and the gradual retirement of the founder.
The choice of the successor CEO in the family business is a key decision for the survival of the company that cannot be based on sentimental reasons. There are still cases in which a son or nephew takes over the reins of the company whose only accreditation is that they are a member of the family. But in this case it is not always preferable to keep the business at home. It is often more desirable to choose an external manager with extensive experience in the sector, even if the ownership remains in the hands of the entrepreneurial family.
In the same way, having a trusted external advisor can provide an objective and unbiased view that looks after the interests of the organisation and avoids conflicts within the family.
It is important to avoid the company turning into a recruitment agency where family members take up positions for which they are not qualified or where even tailor-made jobs are created with a specific person in mind.
Many family businesses make the mistake of assigning salaries and benefits to family members based more on their needs than on their role and level of responsibility within the company. And this inequity can go in two directions:
Both irregularities in the salary scale can lead to problems in the short and long term. Family members working in the family business should be remunerated in full accordance with the internal wage band and the reality of the labour market.
Ultimately, mixing work and personal life is one of the main sources of conflict in the family business. It is a difficult separation to make, but conversations about work at family events should be avoided at all costs.
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