So why can passing on a family business be so difficult? As explains French psychiatrist, business consultant and author Jacques-Antoine Malarewicz, transferring a company to the Next Generation isn’t just an issue of managerial logic – or that particular mental model (comprising biases, assumptions and beliefs) from which a manager(s) operates or approaches problem-solving.
Actually, says Malarewicz, it’s a meeting of managerial logic with family and/or patrimonial logic. If these mental models aren’t congruent, conflict arises – since there’s no dominant (agreed upon) logic for approaching scenarios and resolving challenges. Throw in the issues of money and the transfer of capital (which is what the family business, in effect, represents during this time) – and handing over the baton can very quickly turn emotional and heated.
Mixing business and family
When emotions bubble over, says Malarewicz, past issues – even those which have been buried for decades, like scandalous family secrets such as illegitimate children or nepotism – can resurface. This hampers effective decision-making in the family business in general and surrounding the transfer of power itself.
If not carefully managed, this bad blood can actually destroy the business – in fact, as Malarewicz points out, faulty family dynamics is why ownership of two out of three family businesses no longer rests with the family itself. Another reason why passing on a family business can prove difficult to negotiate, says Malarewicz is when the current head of the business is unable to relinquish control (even if of an advanced age).
The transfer of a family business
Malarewicz also highlights how the so-called generation gap is impacting on family business succession in his native France (some of these trends can be noted in other countries, too). In particular:
- Until recently, a family business would follow the law of primogeniture – that is, it would be passed down to the oldest son. Nowadays, succession is possible via daughters, as well.
- The current generation is not necessarily following in the footsteps of the previous one, instead choosing to follow their own career paths (which may not involve working in the family business).
- In days gone by, religious beliefs actually informed the structure of family businesses – as Malarewicz puts it, there was a kind of ‘collusion between the structural dimension of religion and entrepreneurship’ in France (particularly in the industrialised North and East of the country). As religious practices (predominantly Catholicism) become less a feature of daily life here, so it’s slowly becoming less a feature of the fabric of work life, too.
- Having many children, however, remains a characteristic of entrepreneurial French families – the belief persists that few or no heirs will prove problematic for the continuation of a family enterprise.
How to overcome a crisis of succession
Malarewicz offers the following advice to family businesses in the midst of succession planning, or that are dealing with conflict arising from such a succession:
- Crises occur because problems aren’t anticipated – proper planning will mitigate many of the common succession flashpoints;
- Leaders should resist clinging to power past their ‘sell-by date’ – rather move aside gracefully and empower the next generation to carry things forward;
- Draft a family charter which sets out the family’s mission, ethics, policies and procedures, as they relate both to business and family matters ;
- Look within the family, not the family business – trying to resolve issues present in a family business by addressing them in isolation, without taking cognizance of family dynamics makes no sense. As Malarewicz so expertly phrases it, solutions will be found, not within the family business, but within the family.
For more information, read the full Les Echos article, Jacques-Antoine Malarewicz: “The solution will be at the family level, not the company”.