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What constitutes a family business and what are its pros and cons? Why are they more complex and what do they need to do or avoid to maintain their success even after passing on to the next generations? How successful are they compared to non-family ones? The answers to the above were given to “Family together, business forever” Family business consultants Marios Loukaidis, Elie Wakil and Dimitris Loukaidis of BE.E PHILOSOPHY.
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In 1948, Andy Dassler founded Adidas and his brother, Rudolf Dassler, Ruda, which was soon renamed Puma. Adidas and Puma were the result of business differences and the strong personalities of the two brothers, who, previously, in 1924 started a joint business to make sports shoes in the laundry of the family home in Herzogenaurah, Bavaria. It was the Gebrüder Dassler Schuhfabrik Company (Dassler Brothers Shoe Factory) that became famous at the 1928 Amsterdam Olympics. Adidas and Puma had the same object and the same headquarters, Herzogenaurah, with a population of 23,000. In fact, the city was divided into two and each resident had to choose a camp. For example, the city's two football teams, ASV Herzogenaurach and FC Herzogenaurach, wore T-shirts with the two brands.
FAMILY BUSINESSES
The time history of the Dassler brothers is a great example of the difficulties that family businesses have to face in order to maintain unity among family members. The survival and development of a family business, however, depends not only on the unity of the family members, but also on a number of other factors. Crucial to the prosperity of family businesses is the right transition to the next generation, when the youngest members of the family are called to continue with the same success and unity the work left behind by the founder of the company or his successors.
In Cyprus, family businesses make up about 90% of all businesses. Globally, their number in total companies is very large and ranges at 70% while in Asian countries it reaches 95% and in Great Britain 85%. A family business (large or small) is controlled by a family, either through shares or through the management of the company, while it can also be public. The given goal is to transfer the family business to the next generations.
BETTER
Based on research, cited by Marios Loukaidis in the specialized workshop for family businesses in Cyprus “Family together, Business forever”, organized together with Elie Wakil and Dimitris Loukaidis of Be.e Philosophy, family businesses present better financial results from non-family. Especially in times when the economy is not growing, non-family businesses are doing much better than non-family businesses.
According to Mr. Loukaidis, the commitment of the family, the continuation of knowledge from generation to generation, with the new members of the family learning from a young age about the business, its operation and the values it stands for and finally the pride that carried by each family for its business, are the main parameters that influence to present better results compared to other businesses.
Of course, the commitment weakens as the generations succeed each other, with the result that one in three family businesses manages to pass from the first to the second generation. The percentage remains the same (ie less than 1 in 3) regarding the transition from the second to the third generation, but also the transition from the third to the fourth. These percentages mainly reflect the lack of preparation of the next generations to undertake an evolving business, which has grown and which employs more family members.
WEAKNESSES
At the same time, family businesses are more complex, as they include the family dimension. According to the speakers in the workshop attended by members of family businesses, many of them do not define from their inception or early on some basic policies and procedures that will help them in the future. These are companies that were set up by one person, and who operated & nbsp; all financial and operational processes of the company. However, over time, the absence of formal procedures, a culture of governance and discipline allows family members to use the business's funds without discipline (eg for their own personal needs).
At the same time, as a result of the above reasons, most family businesses end up with introversion and envy, instead of focusing on their progress and development, which puts their very survival at great risk. This is the number one risk and reason for the failure of a family business, since instead of focusing on the external issues and problems it has to face, the company wastes time and energy on its internal problems. & Nbsp; & nbsp;
TECHNICAL
The solution to the above problem, according to Mr. Loukaidis, includes two parts, the technical part and the emotional one. With regard to the technical part, family businesses should create a family statute early on, which will set out the conditions under which new family members will enter the business, such as having a degree and a postgraduate degree, and a five-year previous service in another company. And this provided that there is an open position in the company, for which the new member will compete with other candidates, of whom he must be at least equal to occupy the position.
That is, in general, the framework of rules that will define the operating limits of the company must be set. On the contrary, logics that want new family members to enter the business in positions of their choice or to have the opportunity to enter and leave the business whenever they wish are characterized as wrong. At the same time, the role of each family member in the various levels of management as a shareholder must be defined and finally the responsibilities and decision levels must be defined in the three basic levels of management, namely the Property, the Board of Directors and the Management of the Company. & Nbsp;
BOARD OF DIRECTORS
An important part of a business is the board of directors, which has an obligation to the shareholders and is responsible for the business before the law and is what should direct it. It is therefore important to define the responsibilities of the board and the property. These are parts of the business that must be completely separate and independent in terms of both decisions and responsibilities. Also their composition must be distinct. & Nbsp;
According to Mr. Loukaidis, at the level of management but also at the level of the board of directors, mainly, independent persons with the appropriate qualifications should be involved and depending on the size and nature of the company's operations. These individuals, unlike family members, are not possessed by feelings for the business and its members and are therefore able to deal with various situations from a more independent perspective.
EMOTIONAL
As in other businesses and families, there are relationships between the members that make it up, with the additional element that they are people who have known each other for years and well. It was mentioned that their emotional relationship should be clear and regardless of family ties, everyone should do their job properly or otherwise they should be given the appropriate suggestions.
In addition, a good solution, which is recommended and can be included in business articles of association, provides that a relative to a first-degree relative should not be mentioned. At the same time and regarding the CEO of the company, if the company wishes to be a member of the family, the selection should be assigned to an external organization, which will make the selection based on criteria that will be indicated to it or criteria that it will propose. the organization. In general, Mr. Loukaidis's recommendation is like the difficult decisions on issues concerning family members, taken by independent individuals, so as not to create personal issues between family members.
In conclusion, first of all, the above issues, which concern the company's articles of association, should be clarified early, ie before companies are called to address them. Second, family members need to have an open and transparent relationship and meet for non-business purposes as well, in order to strengthen their relationship. Third, everyone must recognize their role in the business. & Nbsp;
THE PHASES
As mentioned above, the founder of a family business takes all the decisions and risks that concern it. However, when the company moves to the next phase, during which the new generation is called to succeed the founder of the company, things become more difficult and more complicated. Due to the fact that business in Cyprus started mainly after 1960, most Cypriot companies are in the transition phase from the second to the third generation, which is the most dangerous, despite the fact that the losses of family businesses for each transition phase are identical. in percentages. According to Mr. Loukaidis, the transition from the second to the third generation is the really difficult stage. This phase is the so-called cousin confederation, during which a relatively large number of young people of the next generation enter the company. And this, while the members of the new generation may not have close or no relations with each other or have different mentalities, which give birth to “us” and “you”, that is, a separation within the family business itself./p>
In addition, the members of the family business, without realizing it, route their children in specific directions, depending on their inclination, thus leading them to the perception that they are intended for specific parts of the business (eg the accounting department). Another issue is the phenomenon in which parents work in the same departments as their children – who enter the business in order to follow in their parents' footsteps – which, under normal circumstances, they must supervise. >
HUMAN FACTOR
The workshop was quite intense, with the three presenters alternating every twenty minutes, thus keeping the interest of the attendees. Elie Wakil, human relations specialist, covered the very important topics of accountability, self-awareness, crisis management and communication. Dimitris Loukaidis, the “philosopher” of the team began the presentation with examples from the sparrow of “Arka” presenting the parent-child relationship and the phases through which this relationship goes, while with corresponding reports by Kazantzakis he tied both the technical and the issues of human nature and management. He also covered the issue of values and principles and their importance in an organization, which must exist, be real and be reverently committed. The three Be.e Philosophy experts will visit companies at their workplaces to exchange specialized topics with them. p>
