According to the Small Enterprise Development Agency, family-owned businesses make up close to 50% of the economic growth of South Africa, though only a few of the country’s iconic family companies have managed to remain in business over the years. This trend is also apparent across the rest of the continent, with the majority of SMEs operating as family-owned entities.
Balancing the family and the business
So what makes a family business different to any other? There are a number of reasons: the combination of family and business together make it more complex. Balancing the family’s interests and values with business objectives and strategies is not always easy.
How does one separate family and business issues? There’s always the risk that there’s no end to ‘business talk’ when it comes to family members engaging, even after business hours, the business never sleeps. It’s a fine line, and the key is to create structure and routine within the family and within the business – to create some boundaries, and a common understanding within the family around work and life balance.
With a family business, it’s about understanding what work-life balance means to different family members and being able to adapt the management style of the business to incorporate all of those different aspects. More and more nowadays, it becomes more about work-life integration than it does about balance.
Succession in three generations
When it comes to succession, everyone’s heard the saying “rags to riches to rags in three generations” or “shirtsleeves to shirtsleeves in three generations”. Decisions around succession are emotive, with appointment sometimes made emotionally rather than rationally, based on family standing rather than competence.
It’s not healthy, but it is endemic in family businesses, and it must be managed. The risk can be mitigated by properly planning for succession, and perhaps even engaging the services of an independent advisor to take them through the process, and set goals for the succession in terms of what the business would like to achieve and align those with what the family would like to achieve.
It’s important to set Key Performance Indicators, or KPIs, for the people that are moving through the business, be they family members or non-family members, so that you can give the entire organisation the perception and the clear idea that succession is about competence and performance; not just about family.
This is important because the potential exists for non-family employees to feel that it’s only family members who are going to be successful and that there’s no place for them; whereas if succession is competence-based, non-family employees will feel there’s a space for them.
Succession is part of the life cycle of a business, and it’s important that the founders and shareholders and family members see this succession coming, and plan for it in an organised fashion. That’s the key.