Heirs of Family Businesses and the Challenges of Continuity
It is well known that family businesses constitute a significant portion of small and medium-sized enterprises (SMEs) across the globe. Therefore, the sustainability of family businesses is closely linked to the successful process of passing the business from one generation to the next, as well as the ability of family businesses to strengthen the SME economy of their country.
The succession of family businesses has become a key topic of academic research in universities worldwide, aiming to uncover what the critical factors for successful family business succession are.
Since family businesses represent an inseparable connection between business management and family management, ensuring the sustainability of a family business requires managing both the business and the family harmoniously and effectively, which clearly differs from businesses run by employees or professional managers.
Key stakeholders typically include current business leaders, the next generation of heirs, and other family members who have influence over the family business.
Moreover, a crucial factor that can disrupt the sustainable continuity of family businesses often arises from the heirs' decision to opt out of continuing the family business.
PwC, a leading global research and consulting firm, has studied this issue and found that there are four key factors that heirs consider when deciding how to continue the family business, which can be referred to as the 4S's:
Skills - The skills that heirs possess align with or support the current direction of the family business. Can they develop or adjust their skills to meet the expectations of current leaders and family members?
Scale - The size of the business aligns with the goals or vision that heirs have. This includes expectations for the business to grow enough to compete and survive, as well as aspirations for significant growth.
Succession - The process of handing over the business that the current generation prepares for the next generation of heirs is acceptable to the heirs. Some heirs may want to be nurtured, protected, and supported to build a strong foundation first, while others may wish to establish their own foundation and acceptance.
Stakeholders - The attitudes or expressions of stakeholders within the family, the business, and other stakeholders towards the heirs include executives, collaborators, and employees who are not family members.
Additionally, Juliette Johnson, an independent consultant from the INTES Institute, which specializes in family business consulting in Germany, summarized ten key motivations that heirs have for continuing the family business:
1) The opportunity to engage with the family business management, such as helping out during school breaks without the responsibilities of a manager. 2) Gaining experience from working outside the family before getting involved in the family business. 3) Holding a management role that aligns with personal interests or existing skills, or believing they can innovate for the family business.
4) The freedom to maintain their own working identity, especially in relationships with long-standing employees, without excessive formalities. 5) Not having to work under pressure from current leaders or other senior family members. 6) Having the opportunity to understand the financial status, assets, liabilities, and profitability of the business before deciding to join the family business. 7) Seeking understanding and support for their new ideas they wish to bring into the family business.
8) Transparent and sincere communication, interaction, and expression from existing management and other family members involved in the family business. 9) A systematic process for transferring management authority based on good and appropriate business practices, rather than mere appointment by family lineage. 10) Experiencing challenges and finding joy in working and living within the family.
It is hoped that family businesses currently in the process of transitioning to the next generation, along with the younger family members expected to inherit the family business in the future, will understand the spirit of carefully and sensitively transferring and receiving management authority of these businesses.
SOURCE: www.bangkokbiznews.com
