The definitions of the family business may vary according to whether one chooses as criterion:
- ownership of the capital (control and voting rights)
- implication of the family in the management
- requirement of a first transmission in the family, to the next generation.
The challenges of family business
The family business is a living force of the economy. While examining the issues of a family business, the importance of the challenges surrounding the ownership of the family business was highlighted. Particularly when not all children work in the company. Most predecessors prefer to give shares to all children, at least at the time of transfer, regardless of whether the children are involved in the business, still providing for buy-back clauses at later dates.
In the face of the latest economic crises, the family business gains from its employees the commitment and flexibility that allows it to find acceptable solutions and, with the shareholders, the agility and financial mobilization needed to ensure its sustainability. Today, these companies plan to rely, to grow and become leaders, on two main levers: innovation and internationalization. However the pluses and minuses of family business should be considered more closely.
The pluses of family business
Beyond statistics, the family business is first and foremost the adventure of men and women who have created and developed an activity, usually in their region of origin. Thus, the family business places the human capital at the heart of the company and aims at the durability of the values, by privileging the transfer of the company to the next generations of the family, that is declared by more than half of the leaders in the sphere.
The rest of the family business managers say that the family character has allowed the leaders of family businesses to better weather the recent crisis. The reasons given include:
- solidarity (preserving staff at all costs),
- prudent management and anticipation (avoiding risks and overly ambitious projects)
- lack of pressure from shareholders.
The economic crisis has shown that the family business is able to adapt quickly and react.
The minuses of family business
If the entrepreneur – the owner of family business – follows some good ideas, or if luck smiles on him, his business grows and becomes a medium enterprise. Then it becomes necessary to structure it in a few units. Each of these units should be equipped with a manager, of a chief: there is no longer a boss, but a management team.
However, the boss is still in “direct grip” on a small number of managers, often of modest can leave only a small margin of initiative: the boss can direct his managers from day to day and blow the shot, in time particularly because its information circuits are short.
If the boss of the average company follows some good idea, especially if it is placed – or if it is placed – on a good market-produce, if it has good employees, and if luck still favors her, her business is growing. It becomes a big company, not only characterized by its size but, more often, by a certain diversification of its products or its markets.
If the structure of the company does not change, and especially if the direction mode does not change, the owner is gradually over-saturated by the decisions to be taken, asphyxiation by the information: it becomes a “bottleneck”, it does not find – or he loses – competent executives. In the best of cases he discovers and, if he is lucid, he admits
- That the company must be divided into a number of units
- by function or by product
- the size and complexity of which are comparable to those of small businesses,
- That a manager must be assigned to each unit,
- there is a need to delegate to each of these unit managers.
Interrelations between employer and employees
There are four types of family business culture identified:
- paternalistic
- prevaricative
- participatory
- conflictual
According to the established typology, we rely on seven postulates concerning both the nature of the relationship, human nature, the nature of the truth, the environment, universalism or particularism, the nature of the relationship. What is the nature of the relationship? Are the relationships between the members of the company hierarchical, group-oriented or individualistic?
According to the concept of confidence can be explained the best performance of family businesses. It comes from the natural continuity of relationships between family members, without the risk of conflict between the principal and the agent.
The quality of relationships between members of a close family, a culture more clearly defined, that results in:
- better shared information and its better quality
- the presence of a long-term perspective
- all family members, being employees, can also influence favorably the performance of the company they manage, through optimal investment decisions and more efficient use of assets that also increase the confidence of suppliers and financial partners.