They are defined as having a determining influence on the progress of a company.
This type of company is characterised by this influence, and not its size. Between 70 and 85% of all businesses can be categorised as family businesses, depending on definition. So, with an estimated 3.38 million small and medium sized businesses in Germany (as at: 2003), we are talking about well over two million family businesses of that size.
This considerable number makes it clear that family businesses – in which either one member, several members of differing degrees of relationship, or even several families collectively, own a company – are in fact the much vaunted backbone of the German economy.
This is very significant, not only to the companies but also to the families. What actually constitutes a family business? There is no clear definition (which explains the fluctuating estimates). Some researchers approach it by defining quantifiable structures, such as assuming an ownership share of at least 50 percent. But a much more promising definition assumes that a company is owned by a family or a group of families that exercise a decisive influence on what happens to the business. They must be in a position to shape the crucial decisions in the business, and to give the business its character, both internally and externally. If this is the case, then one can meaningfully talk of a family business. This definition allows us to consider everything from the structures to the numerous, complex dynamics in family businesses. It guides our attention to the way we define roles, interaction processes, and the relational dialectics that families and businesses deal with and that go to make up with ‘familyness’ – which means the particular set of resources and risks which the family and company have.
It is this peculiarity which is hard to get a handle on if we reduce family businesses to particular definitions of size, which is why this thesis comes before all the others. Family businesses of different sizes, from artisan businesses to multinationals, are the product of the often productive, sometimes destructive synergy of business and family logic. The conflicting set of priorities which this produces have two poles which can be characterised as follows: In families, the focus is on the individual person with all their strengths and weaknesses. They are valued simply because they belong to the family. Fairness in this context is understood mainly in terms of equality of claims, rights, duties and expectations. Membership of a family is for life, because you cannot hand in notice on blood ties. Giving and taking are often asymmetrical (parents-children), and immediate or medium-term reward is not expected for work done.
And indeed, the profit obtained from these relationships is more emotional and non-material than it is material. Communication is primarily verbal and less formalised. In a business, however, the primary focus is on the development, production and sale of products and/or services. People are only important in terms of objectively justifiable functions they fulfil for the organisation. In principle, they have to be replaceable in the roles they fill, which means they must be terminable. Their value is derived from the work they do, which is compensated directly and materially through wages and salaries. Fairness here is defined as a balance between performance and material reward. Communication is formalised, and mostly even fixed in writing – contracts are sealed by a signature on paper, not by a shake of the hand. These two very different sets of logical working principles belonging to family and company influence each other reciprocally, thus shaping the particular properties of a family business.
It is precisely this linking of different logics which leads to shareholder disputes and disruption in the business family, fuelling generational conflict and so on. At the same time it is precisely this linkage which can give a family business its special competitive edge over a company led by the principle of shareholder value, since the family which owns the business often imparts values that can give the business meaning beyond that of short-term financial profit expectations and promises. “Family businesses don’t consider the market and values as alternatives. They say: both.” From this viewpoint, the aim is not, as is often demanded, to quickly and completely decouple the family and company, it is to promote precisely that positive interaction between both systems in order to achieve synergy effects and the concomitant competitive advantages.