12 July 2022 | 0 comments
Not everything runs in the family, that is succession in family businesses
Family businesses have always existed and are dominant in the sector of small and medium-sized enterprises. Currently (according to GUS data from 2021) there are about 2 million of them in Poland, they generate nearly 8 million workplaces. Family businesses are often the work of many generations, but time does not stand still. The tradition of handing over the business “from father to son”, “from grandfather to great-grandfather” is slowly starting to disappear. Their strategies, management styles and specificity of functioning were shaped not only by systemic transformations, but also by technological progress and globalization.
From this text you will learn:
- how the first family businesses were shaped,
- what are the characteristics of such businesses,
- how to take care of the future of a family business,
- about an interesting case study,
Difficult beginnings of privatization
Communism, which determined the political and economic conditions after 1939, meant that in post-war Poland, hardly anyone knew the concepts of entrepreneurship, free market principles and knowledge-based economy. Poles had to learn it themselves. During the political transformation, when state-owned workplaces collapsed, there was finally an opportunity to start your own business. Somebody had just bought at least one machine from liquidated factories to start working on their own. The natural course of events in building a joint business was often the whole family involved.
The later 1990s and the sprouting democracy were also not kind to entrepreneurs. Everyone coped as best they could. There was a lack of education, resources, financial support and state apparatus that would be able to organize the processes.
Polish entrepreneur of the 90s
The aftermath of this time is, for example, excessively extensive bureaucracy, intricate and demanding regulations, which we are only now beginning to simplify. However, out of the described chaos, a Polish entrepreneur emerged: a multi-tasking and committed employer who concentrated in one person the competences and duties of the extensive management of the present corporations. Hard work is his middle name, he treats weekends and holidays as an unreasonable whim. He works tirelessly, involving his entire immediate environment in maintaining the family business. Today we know him as a representative of the X generation, a counter model for the representatives of the younger generation, who no longer want to live for work and only devote themselves to it.
Compared to the rapidly developing and favorable conditions of the Western economies, small Polish entrepreneurs faced enormous challenges. In retrospect, we can say that even then the owners of family businesses had to learn to quickly react to changes and adapt to what the uncertain future brings (for example frequent changes in complex regulations and high costs of running a business).
Only on photographs would your kin look nice?
Family businesses are clearly different from other businesses. The entanglement and challenges of running a business with loved ones make their business model different than in the case of traditional organizations. It is often so clearly visible only when the topic of succession appears and it is necessary to decide who will take over the inheritance from the owner – usually the father.
So what distinguishes family businesses?
- combining private matters with business – family members spend time together both at work and at home. Not surprisingly, the boundaries between these two areas are dangerously blurring. It is common to discuss business matters during Sunday lunch or personal problems during business meetings.
- emotional involvement – a self-created organization becomes a “child” of its owners. Family members, who are also co-workers, approach corporate matters with great commitment. After all, they started their own business from scratch or took it over from their grandparents or parents. Therefore, they take the company’s successes and failures very personally and emotionally.
- the possibility of immediate reaction in a crisis situation – by running their own business, the whole family is “up to date”: they know what is happening at the moment, what challenges the company is facing, what are the risks and opportunities. So it can act quickly – in the event of unexpected market events or problems related to the business itself, immediately discuss the available solutions and react.
- unique organizational culture – family ties and tradition are key here. Organizational culture of family businesses is often based on well-established, common values learned from home. It is accompanied by direct relationships, frequent conversations and numerous opportunities for meetings and integration.
- the threat of unequal treatment – having “favorite” family members or visibly sympathizing with relatives at the expense of relationships with unrelated employees is a trap that is often unconsciously fallen into.
- concern for the future of the company – the need to plan succession, a possible decision to sell the company while retaining shares or transfer “power” to the managing director – these are decisions that the owners must make at some point.
There are many challenges that family business owners face. Close relationships make it difficult to objectively assess the situation and make a decision that will be good for everyone involved and for the business. If you feel that it is too much for you and your company, it is worth considering the option of using the support of an external company, especially when the company operates without its own HR department, and there are difficulties on the horizon, related to e.g. succession. The skilled eye of an outside expert helps to “coolly” look at all elements of this complex network of connections and relationships.
The family business is no longer from father to son
The traditional model of transferring the family business from father to son dates back to antiquity. Changes in the demographic and political structure, improvement in the economic situation, greater development opportunities, globalization and differences in values and life priorities mean that descendants do not always want to follow their parents’ career path.
This can be seen on the basis of processes, e.g. in the sewing, production or agricultural industries, in which we are currently observing a large stir. Companies are put up for sale because the aging owners have not developed successors. In the next five years approx. 57% of family businesses will be transferred to the younger generation and at the same time only 8% successors declare their willingness to run a business created by their parents (data from the Family Business Institute).
This is due both to the fact that the children “from the inside” watched the building of the business, saw with their own eyes the stress, the hardships of hard work without a moment of rest and the huge responsibility associated with running their own business. They don’t want to spend their time and life duplicating this model.
On the other hand, the choice is not that simple. Young people face a dilemma, because a family business has a value, long-standing reputation and market position. They are also aware that thanks to the family business their parents had the means for education and development of their children’s passions.
Family business: Look from outside
A generational change is inevitable at some point. Whether it is for successors to take power or to sell part or all of the company to someone else, it will always be a great experience for owners who have built their business from scratch.
The support of an HR consulting company allows you to go through the entire process more smoothly. External experts, having many years of experience, know that their task is to build a bridge between the needs and expectations of each party and to reconcile the vision of the past, future and present.
Sometimes it is entering the role of a mediator between the owner and successors or new owners, and sometimes it is an interpreter who will explain corporate newspeak. Going through the entire transformation process, the parties expect to find the best solution for them, often “tailored”.
And no wonder, after all, every story is different.