The WIFU Glossary explains key terms related to family businesses and entrepreneurial families. The definitions provide scientifically sound classifications and create orientation on topics such as family business governance, family strategy, succession, shareholder competence, the Mittelstand (medium-sized enterprises) and digitalisation.
Family strategic maturity describes how consciously and systematically a business-owning family organises self-reflection, communication and collaboration in order to strengthen decision-making and cohesion.
In keeping with Kane et al. (2018) maturity makes it visible how far corresponding structures and routines within the family business have been developed and are actually applied.
This provides insight into whether a family strategy is more implicitly present or explicitly formulated and implemented. At the same time, it demonstrates the viability of the family governance or the self-management of the entrepreneur family based on it.
A family business is characterised by the combination of ownership, entrepreneurial responsibility, and a transgenerational perspective.
We are talking about a family business when
The transgenerational moment is essential for family businesses. Therefore, not only the current ownership structure is crucial, but also the intention to pass on ownership, leadership, and responsibility across generations.
The legal form and size of the company are irrelevant here. Start-ups or owner-managed companies are not considered family businesses solely on this basis if this intergenerational perspective is lacking.
Shareholder competence (SC) encompasses the skills and abilities of current and potential shareholders of a family business to responsibly exercise their ownership function. This includes successfully fulfilling rights and obligations within the shareholder family. Furthermore, shareholder competence describes the capability to successfully deal with previously unknown situations in the company and the entrepreneurial family. Thus, it not only includes specialist knowledge but also judgment, understanding of roles, sense of responsibility, and the ability to place decisions within the interplay of family, ownership, and business.
Shareholder competence development (GKE) refers to all measures through which members of a business-owning family promote the development and ongoing enhancement of these competencies. This includes training and further education opportunities, as well as experiences that are helpful for the future or current fulfillment of a shareholder role within the jointly-owned family business.
This definition also includes members of the shareholders’ family who do not yet hold shares in the family business or who take on key parenting responsibilities.
A family strategy describes how a business-owning family develops its medium and long-term vision for the future and how it can remain a permanent resource for the company. It is an essential component of family business governance or family governance, and helps the family to reflect on its self-image, its roles, and its responsibility towards the company.
The entrepreneurial family is consciously aware that a family business consists of three distinct social systems: family, company, and ownership. Each of these systems follows its own communicative logic. Consequently, issues can be assessed differently from a family, corporate, and ownership perspective. The resulting paradoxes must be continuously balanced.
Among the essential tasks of a family strategy is to recognise potential risks of future developments even when everything appears to be running smoothly. This requires both a view of the entire family and of individual people with their respective needs. The leadership of entrepreneurial families must therefore think and act on two fronts: they not only strategically support the business, but also the family itself.
A family constitution is a document – usually not legally binding – in which an entrepreneurial family sets out the key guiding principles underpinning its family and business philosophy. These may include values, definitions, requirements, expectations, procedures and process descriptions. In practice, such documents are also referred to as a family charter, family code, family statute or family mission statement.
The family constitution makes shared principles visible, discussable, and comprehensible. It can provide guidance on the management of property, roles, communication, conflicts, succession, and collaboration. To document their willingness to accept and adhere to the agreed content, it is often jointly signed by the members of a business-owning family.
Family Business Governance describes the rules, structures, and instruments used by a business-owning family to shape the interplay of family, ownership, and business.
Governance generally refers to the principles for managing complex systems. In economic contexts, it concerns the leadership of an organisation, where it is referred to as Corporate Governance or Business Governance. Family Business Governance or Family Governance applies this perspective to family-owned businesses. It equally focuses on the concerns of the family and the business, creating a framework for how the family interacts with the business.
The aim is to clarify responsibilities, communication, decision-making processes, and roles in the interplay of family, ownership, and business. Key bodies are considered to be the Family Council, the Shareholders' Committee, and the Family Office. Key instruments are considered to be conflict management, family activities, shareholder competence development, and social engagement.
The term 'Mittelstand', or small and medium-sized enterprises (SMEs), is often used in connection with family businesses. However, it primarily describes a size category of companies – based, for example, on the number of employees, annual turnover, or total assets.
The European Commission distinguishes between SMEs based on quantitative criteria such as the number of employees, turnover, balance sheet total, and company independence. The Institute for Small and Medium-sized Enterprises Research in Bonn also defines the economic middle class using size criteria such as the number of employees and annual turnover. The term „economic middle class“ is primarily used in German-speaking countries; internationally, the term "small and medium-sized enterprises" is more commonly used.
From the WIFU Foundation's perspective, however, this size classification is not sufficient to explain family businesses. What is crucial is not whether a company is small, medium-sized, or large, but whether it is shaped by the family factor: through a special ownership structure, entrepreneurial responsibility, leadership influence, and a focus on generational sustainability. Family businesses can therefore be medium-sized, but they do not have to be. Conversely, not every medium-sized company is automatically a family business. For the classification of family businesses, the connection between family and business logic is primarily central.
Succession encompasses all measures, activities, and dynamics in family businesses and entrepreneurial families that are intended to ensure the transition of ownership, leadership, and sense of responsibility to the next generation.
The focus is on maintaining the transgenerational moment. This describes the endeavour to pass on ownership, leadership, and a sense of responsibility within the entrepreneurial family across generations.
Succession therefore does not just concern the filling of an individual leadership position. It also encompasses roles, expectations, decision-making processes, ownership responsibility, and the long-term future viability of family businesses and entrepreneurial families.
Dynastic extended families are entrepreneurial families with a shareholder group of more than 50 people who want to maintain the family business as the property of the founder's descendants. Alongside the shared desire to maintain the family business as the property of the founder's descendants, the interaction as a network of relatives is characteristic of this type.
In dynastic large families, the organisation of communication, participation, responsibility, and decision-making ability is particularly demanding because the shareholder circle is large, often geographically dispersed, and structured across multiple family branches.
Digital openness, also *digitale Offenheit*, describes how open a business family is to digitalisation and to what extent they understand, evaluate, and support digital developments.
This isn't just about technical interest. The key is whether the entrepreneurial family can assess the opportunities and risks of digitalisation and is prepared to strategically allow for digital change.
This attitude, especially in family businesses, shapes whether digitalisation is understood as a purely IT issue, a risk, or a future topic for the company, ownership, and family.
Digital Readiness describes how well a family business and its owner family are prepared to effectively implement digital transformation.
This includes existing digitalisation expertise, entrepreneurial application competence, and the ability to assess digital opportunities and risks. It is not only crucial whether digital technologies are available, but whether the necessary competencies, decision-making processes, and responsibilities are present and can be activated.
In family businesses, digital readiness is particularly closely linked to the entrepreneur family: their attitude, knowledge, and willingness to prioritise influence whether digitalisation is shaped strategically or only implemented sporadically.
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