Family businesses are economic entities in which management and capital are majority-owned by members of the same family or a group of founding families. According to the
Institut Montaigne
60% of European companies are family businesses, and they alone account for 40-50% of jobs. But what’s so special about these family businesses? What are their characteristics, strengths and weaknesses? What challenges do they face and how can they be overcome?
In this article, we take a look at the specific characteristics of family businesses, their culture, values, governance, transmission, performance and resilience. We’ll also give you some tips on how to run a family business, whether you’re a founder, successor or employee. We hope you find this article useful and inspiring in managing your family business.
Family culture and values at the heart of the company
One of the distinctive features of a family-run business is its culture, based on values handed down by the founding family and shared by successive generations. This culture manifests itself through three aspects: identity, transmission and commitment.
Family business identity: more than a brand, a heritage
The identity of a family business is a reflection of its history, vision and mission. It expresses what sets us apart from other companies, what makes us strong and unique. The identity of the family business is more than a brand, it’s a heritage that is perpetuated and renewed over time. It inspires confidence among customers, employees and partners, who recognize the values of the family business.
Passing on know-how and passion
The family business is where know-how and passion are passed on between family members. Know-how is the fruit of experience, innovation and quality of work. Passion is the driving force behind motivation, creativity and performance. Know-how and passion are passed on through apprenticeship, mentoring and dialogue. It preserves and enriches the family business’s heritage.
Values of solidarity and long-term commitment
The family business is founded on values of solidarity and long-term commitment. Solidarity means mutual support, respect and loyalty between family members and employees. Commitment manifests itself in responsibility, risk-taking and strategic vision. These values enable the family business to face up to challenges, adapt to change and project itself into the future.
Specific governance and succession issues
While family culture and values are assets for family businesses, they can also be a source of difficulties, particularly in terms of governance and succession. These two aspects are essential to ensuring the continuity and performance of the family business, but they raise specific issues that require preparation and anticipation.
The challenge of transferring power within the family
The handover of power within the family is a delicate moment, which can generate conflict, frustration and misunderstanding. It’s a question of choosing the successor to the manager, who must be competent, legitimate and accepted by the other members of the family and by the employees. It’s also a question of defining the role and place of the outgoing manager, who must know how to gradually withdraw without imposing himself or stepping aside. The handover must be a transparent, shared process, supported by the family council and the board of directors.
Balancing family and business interests
Balancing family interests with the interests of the company is another major challenge in family business governance. This involves reconciling the needs and expectations of family shareholders, which may be divergent or contradictory, with the objectives and constraints of the company, which must remain competitive and innovative. It’s also about preserving cohesion and trust within the family, which can be affected by tensions and rivalries. Balancing family and corporate interests requires effective communication, a clear division of roles and responsibilities, and the involvement of family shareholders in corporate strategy.
Strategies for preparing the next generation
Preparing the next generation is an essential strategy for ensuring the continuity and development of the family business. It’s all about training and motivating future managers and shareholders, who must acquire the skills, knowledge and values needed to take up the torch. The aim is also to gradually integrate them into the company, giving them assignments, projects and responsibilities tailored to their profile and aspirations. Lastly, they must be involved in the company’s vision and strategic decisions, by participating in the family council, the board of directors or specific committees.
Economic performance and resilience of family businesses
Family businesses are not only social and cultural players, but also major economic players. They often outperform non-family businesses, particularly in terms of profitability, growth and value creation. They are also highly resilient to crises, thanks to their management approach, adaptability and investment in human capital and local development.
A management approach that is often prudent and sustainable
Family businesses tend to adopt a cautious, long-term management approach, focusing on financial stability, debt control and profit retention. They are less exposed to financial market fluctuations and external shareholder pressures. They have a long-term vision, which translates into strategic choices consistent with their identity and mission. They also pay close attention to the quality of their products and services, customer satisfaction and employee loyalty.
The ability to adapt to crises: the family cohesion effect
Family businesses have a remarkable ability to adapt to crises, whether economic, technological, natural or health-related. They benefit from the family cohesion effect, which enables them to mobilize family resources and skills, strengthen employee solidarity and commitment, reduce costs and decision-making times, and seize opportunities for change and innovation. They are creative, flexible and responsive to unforeseen and hostile situations.
Investing in human capital and local development
Family businesses are well aware of the importance of human capital and local development for their performance and resilience. They invest in the training, development and motivation of their employees, whom they see as members of the extended family. They promote diversity, inclusion and the participation of different generations, women and minorities. They are also involved in local development, supporting social, cultural and environmental initiatives, creating jobs and wealth, and contributing to the well-being of the community.
Family businesses are major economic, social and cultural players, distinguished by their culture, governance, performance and resilience. Their values of solidarity, transmission, commitment and innovation enable them to meet the challenges and opportunities of today’s world. If you’re interested in a family business, whether you’re a founder, successor, employee or partner, we invite you to contact us for personalized advice and support. We’ll help you create, develop, transfer or join a family business, while respecting your identity, your vision and your project.
The Finopia team FinopiaThis team, made up of experts from a variety of backgrounds, is able to identify the problems faced by family businesses thanks to the experience of several in-depth diagnoses. By implementing targeted actions, companies quickly notice improvements, enabling them to concentrate more on their core business and development. Precise actions solve critical problems, optimize operations, reduce costs, improve productivity and enhance product or service quality. What’s more, these actions accelerate business development by freeing companies from internal constraints. All with a clear focus on the objectives of the Governance Committee to achieve the desired results. Positive results boost team confidence and motivation, creating an environment conducive to continued growth.
Working with
Finopia
family businesses benefit from the team’s expertise to solve their specific problems, improve their performance and focus on their long-term objectives.
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