Power and control impact family businesses, just like any other enterprise. What makes the inevitable power and control struggles even more complex in a family business are the family dynamics that play a significant role in decision-making and succession planning. If family dynamics are not centred on a shared purpose, the result is often organizational friction and low performance. A common mission, high-trust relationships, and effective decision-making can help to bolster family-business performance, especially in today’s uncertain business climate.
Large family companies wield significant influence in their industries and on the global economy. The growth and sustainability of a family business and its impact on the economy lies in the fine balance between the business’s needs and family members’ expectations.
There are a number of fault lines that can upset the balance of the family business. Hereunder a few examples ;
- Lack of trust: Only 30% of family businesses survive into the second generation. This means that in 70% of family businesses, the family loses control of the assets, and relationships are potentially destroyed. A lack of trust and communication are responsible for 60% of that failure rate.
- Lack of a shared purpose: Although family members in different generations may have different values, a shared purpose can help employees to align their values and interests in support of a common mission.
- Control vs. care: Family businesses can go under for many reasons, including conflicts over money, poor management, and fighting about the succession of power from one generation to the next.
- Cordial hypocrisy: Family members too often avoid tough issues by avoiding meaningful conversations. Left unaddressed, these tensions increase distrust in families and obstruct performance in their organizations.
With the right skills, high-trust relationships and structures in place, such breakdowns can be overcome.So how can managers apply this information to their own family businesses? Here are some practical suggestions:
- Build trust in concrete ways.
- Inculcate the shared purpose of the family business.
- Establish effective communication protocols.
- Develop decision-making processes that take power, family dynamics, and business priorities into consideration.
Family businesses play a significant role in society and in the economy. Effectively aligning power and family dynamics bolsters business performance, family relationships, and the means to be a more effective force for positive social impact — which is especially crucial during these turbulent times.
( All factual and statistical information presented in this blog has been obtained from an extract of an article from the Thomas.co/resources/succession planning ) Follow us on our Facebook page and Family Business Office website at www.familybusiness.org.mt
At the Family Business Office we can offer you assistance in dealing with family business succession planning issues through incentives supporting advisory and mediation services. Contact us today on [email protected].