Family businesses or family enterprise is often the business structure chosen by migrant entrepreneurs. Family businesses are an often overlooked form of ownership. Yet they are a very common form of business structure from the corner dairy to household names such as Swatch, The New York Times, Samsung, and BMW.
Nearly one-third of all companies in the S&P 500 index and 40 percent of the 250 largest companies in France and Germany are defined as family businesses, meaning that a family owns a significant share and can influence important decisions, particularly the election of the chairman and CEO. As family businesses expand from their entrepreneurial beginnings, they face unique performance and governance challenges. No matter what their size, the unique—and often volatile—mix of personal family dynamics, business strategy and ownership criteria can create an emotionally charged environment that makes decision-making, not to mention day-to-day management, challenging. As the founding generation ages, succession and power issues across an expanding family can create cascading concerns.
The generations that follow the founder, for example, may insist on running the company even though they are not suited for the job. And as the number of family shareholders increases exponentially generation by generation, with few actually working in the business, the commitment to carry on as owners can’t be taken for granted. Indeed, less than 30 percent of family businesses survive into the third generation of family ownership. To be successful as both the company and the family grow, a family business must meet two intertwined challenges: achieving strong business performance and keeping the family committed to and capable of carrying on as the owner. Many family businesses have learned that a little structure can be extremely helpful when it comes time to discuss sensitive issues—such as ownership shares, rights and responsibilities, the competence of family-member managers, and agreeing on a strategy that is best for both the business and the family.
At QCL, we talk and take the time to understand the unique—and often explosive—mix of personal family dynamics at play in your family business. QCL will provide your the best advice in structuring Family Enterprise governance from a inter generational perspective. By improving your structure and governance will go a long way towards preserving family harmony and aiding the success of the business across many generations.