Understanding Family Business

Did you know that a staggering 75% of private sector businesses in the UK are classed as a family business?  According to the IFB (Institute for Family Business) they account for over 40% of private sector employment, providing jobs for some 9.5 million people!

This clearly makes them a major player in helping to drive the economy forward, yet they are largely ignored by UK policy and rarely given the credit they deserve for their ongoing contribution to local and wider communities.

Strictly speaking there are three main types of family business:

  1. Owner-managed – owned and controlled by one person
  2. Family-managed – ownership and management shared between at least two family members
  3. Family-controlled – management shared with non-family members, but family members hold a majority of the voting rights

Established family businesses are unusual and complex structures, blending many of the following elements:

  • Common values – sharing the same beliefs, ethos and interests, giving a sense of purpose and pride
  • Strong commitment – putting in extra hours and effort to make the business a success
  • Loyalty – sticking together in hard times, showing trust and determination
  • Stability – fostering longer term thinking for growth and success
  • Stewardship – managing and nurturing resources
  • Flexibility – taking a more flexible approach to working practices
  • Re-investment – willing to reinvest profits for the longer term good

Today, family businesses are beginning to be seen as important ‘breeding’ grounds for tomorrow’s entrepreneurs, with many start-ups beginning life as a family enterprise, or being a spin-off from an existing family firm.  The key traits of loyalty, trust and integrity, associated with the family business, are also being used as strong marketing messages to counter the anonymous, profit-seeking motives of the large conglomerates.

However, many of the advantages linked to family businesses can easily become their downfall, particularly if clear communications and transparent processes are not adopted at an early stage, along with understanding of the emotional aspects involved.  For example:

  • Common values – can lead to narrow or blinkered thinking
  • Strong commitment – can make it hard to separate work from family, leading to stress and resentment
  • Loyalty – can lead to the wrong people being in the wrong jobs
  • Stability – can make change and adaptation more difficult
  • Re-investment – can result in lower wages and a difficulty in attracting professional management

Many misunderstandings and potential areas for dispute in family businesses can be avoided if good communication channels are in place to avoid: assumptions being made, personal ties inhibiting honesty, personal resentments becoming business resentments and non-family members feeling excluded.

Understanding their complexities and being more open about the challenges they face, will go a long way to ensuring Family Businesses are here to stay for their children and their children’s children.

Family Business issues are also included in: Family Business Charter and A Family Business Fairytale

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