Business and family

INTERFACE BETWEEN BUSINESS AND FAMILY

Family businesses are characterised by close interactions between the company and the family over generations. Unlike other corporate configurations, the family factor in the circle of leadership and ownership is the defining feature. In younger family businesses, securing operative succession is often the focus, whereas in multigeneration family businesses, integrating non-operative shareholders into the family business is the central issue. Shareholder groups that grow strongly, sometimes organising themselves into multiple ‘tribes’ and large dynastic family associations, seek ways of providing meaning and inclusion for the association of shareholders. This involves a defined family strategy, clear regulations as part of family governance and the legal implementation of these aspects.

FAMILY BUSINESS GOVERNANCE & FAMILY STRATEGY

Individualism and freedom come at a cost. In the past, there may have been clear ideas and conventions about family relationships, forms of married life and the regulation of succession in a company, whereas today’s business families are, as is the general trend in society, free to define and shape their ‘family associations’. If the family business is to survive over several generations, it is important to set up a canon of rules for orientation and behaviour within the family. That is why the first task is to discuss and address an actual family strategy, which is often only implicit.

The difference between an implicit family strategy and what is actually practised in the everyday lives of a business family eventually becomes clear when – if not before – the expectations and ideas within the family cease to align at a change of generations or between parts of the family, or if the ideas held by new bearers of responsibility from the family are no longer compatible. A set of business family guidelines jointly developed in dialogue creates a kind of morally binding set of rules for the family members, which documents the ‘will of the family’.

The now widespread term ‘family business governance’ refers to paying equal attention to the treatment of family and business issues. Family business governance brings together family governance and business governance. Family governance aims to create rules that ensure that the family remains able to make decisions and deal with the company. Generally speaking, a family strategy and its formulation in a family constitution (charter, code or statutes) are considered a key part of family business governance.

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Witten process model for developing a family strategy

The aim is to develop a (self-) management system for the business family to help it to avoid internal conflicts and resolve them efficiently, to establish decision-making processes, to develop successors who can take on responsibility, to build up the expertise needed within the shareholder group, and much more. This kind of family management ensures that the family remains capable of acting and that they discuss critical themes with each other. Furthermore, it creates a common point of reference and a shared way of understanding values in the family business. Family management helps to implement structures that counter imbalances within the family.

OWNERSHIP COMPETENCE

Unlike the owners of publicly owned companies, shareholders in a family business are faced with the challenge of actively helping to shape the future of the business. It is their job to provide the management with long-term objectives, advise them strategically on equal terms and monitor them appropriately. As members of business families, not only do they need the technical qualifications to do this, but they also need to be familiar with the functional logic and system dynamics of families and family businesses. In short, they need specialised knowledge called ownership competence.

Ownership competence encompasses all the abilities and skills belonging to the current and potential shareholders in a (family) business who need to actively exercise their ownership interests as well as their rights and duties within the owning family. It also involves the ability to deal successfully with previously unknown situations.

WITTEN THINKING

Ownership competence development is a key success factor in ensuring that the family in a family business remains able to speak and act. We can derive the following concrete guidance for business and owning families:

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Recommended guidance

Assess the form in which you systematically practise ownership competence development and which of its aspects tend to occur more opportunistically (take stock). If you do not have a ownership competence development programme yet, initiate a discussion about it in your owning family and establish activities accordingly. It is important to include all the shareholders and family members in the decision-making and implementation processes. Ideally, you should discuss these themes and how they manifest as part of family strategy considerations.
If ownership competence development is already practised, assess who benefits from the qualification activities and who has not been considered (yet). Ensure that the ownership competence development on offer is made accessible to as many of the owning family as possible, especially the following generation and family members who do not hold shares (yet).
Ensure that development includes not only conventional management and finance topics but also more general ones, such as legal and psychological knowledge and the specifics of your family business, as well as family businesses as a whole.
Differentiate development programmes for future generations in terms of what their prospective roles will be in the shareholder group or business. The demands on the abilities and skills of a non-active shareholder are very different from those of a manager in the business. In addition, they can become much broader if, in their role as shareholders, they take up a position in a consultative body or a leading position on a board (chairman of the supervisory board or similar).
Ensure that ownership competence development becomes a systematic component of your family management system and that it is organised and structured. This involves carefully defining the learning content as well as the conditions for participating in the training and development process.

THE FAMILY OF THE FAMILY BUSINESS – THE BUSINESS FAMILY

Business families are families in which people who are related to each other are the owners of one or more businesses for which they carry economic responsibility that is handed down through generations. They bring together two types of systems that are usually separate in our society, private families and business organisations, and entail challenges and the risk of conflict among members of these families, old and young alike. The question of succeeding to the role of an operative member of the business and/or responsible shareholder influences upbringing, education and socialisation in such families. Thus, growing business families are confronted with formally organising themselves and developing family strategies and family governance structures to fulfil responsibilities relating to the business. In very large multigeneration business families, there is the question of how the family network, as it grows more complex, can be kept together for the purpose of sustaining the family business.

LITERATURE ON THE SUBJECT OF BUSINESS AND FAMILY (GERMAN SELECTION)

FAMILY GOVERNANCE & FAMILY STRATEGY

SHAREHOLDER EXPERTISE

Buch: Rüsen, T.; Heider, A. (2020): Aktive Eigentümerschaft in Familienunternehmen – Gesellschafterkompetenz in Unternehmerfamilien entwickeln und anwenden.
Rüsen, T. A. (2020): Gesellschafterkompetenz in Unternehmerfamilien – Alles, was ein Gesellschafter und dessen Angehörige wissen und können sollten. In: Rüsen, T. A. / Heider, A. (Hrsg.): Aktive Eigentümerschaft im Familienunternehmen – Elemente der Gesellschafterkompetenz in Unternehmerfamilien. Verstehen – Entwickeln – Anwenden, Erich Schmidt Verlag, Berlin 2020, S. 25 – 48.
Rüsen, T. A.; Stangenberg-Haverkamp, F. (2020): Die Entwicklung von Gesellschafterkompetenz in der Familie Merck. In: Rüsen, T. A. / Heider, A. (Hrsg.): Aktive Eigentümerschaft im Familienunternehmen – Elemente der Gesellschafterkompetenz in Unternehmerfamilien. Verstehen – Entwickeln – Anwenden, Erich Schmidt Verlag, Berlin 2020, S. 393 – 398.
Book: Rüsen, T.; Heider, A. (2020): Aktive Eigentümerschaft in Familienunternehmen – Gesellschafterkompetenz in Unternehmerfamilien entwickeln und anwenden.
Article: Rüsen, T. (2018): Family Education – überschätzt oder unterschätzt? In: Ebel, K. et al. (editors): Familienunternehmen: gestern, heute, morgen. Festschrift for Peter May on his 60th birthday. Hamburg: Murmann, p. 268-277.
Article: Rüsen, T.; Schlippe, A.v. & Groth, T. (2014): Gesellschafterkompetenz in Familienunternehmen. In: Familienunternehmen und Strategy (FuS), Issue 3/2014, p. 101-108.

THE BUSINESS FAMILY

Keßler, R., H. Kleve & T. Köllner (2020): “Succession and Family Structure: Untangling Legacies Through Genogram Research.” SAGE Business Cases Originals,http://dx.doi.org/10.4135/9781529726909.
Kleve, H. (2020): Entwicklungsstufen und Systemlogiken in Unternehmerfamilien. In: Rüsen, T. A. & Heider, A. K. (Hrsg.): Aktive Eigentümerschaft in Unternehmerfamilien – Gesellschafterkompetenz in Unternehmerfamilien entwickeln und anwenden. Berlin: Erich Schmidt Verlag, S. 175-191.
Kleve, H. (2020): Sozialisation, Erziehung und Lernen in Unternehmerfamilien. Das KEA-Modell für „Kopf“, „Herz“ und „Hand“. In: Rüsen, T. A. & Heider, A. K. (Hrsg.): Aktive Eigentümerschaft in Unternehmerfamilien – Gesellschafterkompetenz in Unternehmerfamilien entwickeln und anwenden. Berlin: Erich Schmidt Verlag, S. 247-25.
Schlippe, A. v. (2020): Die Unternehmerfamilie – eine Spezies für sich. In: Rüsen, T. A. & Heider, A. K. (Hrsg.): Aktive Eigentümerschaft in Unternehmerfamilien – Gesellschafterkompetenz in Unternehmerfamilien entwickeln und anwenden. Berlin: Erich Schmidt Verlag, S. 159-173.
Kleve, H., S. Roth, T. Köllner & R. Wetzel (2020): “The Tetralemma of the Business Family: A Systemic Approach to Business-Family Dilemmas in Research and Practice” Journal of Organizational Change Management 33 (2): 433–446. DOI: 1108/JOCM-08-2019-0254.
Kleve, H., T. Köllner, A. von Schlippe & T. Rüsen (2020): “The Business Family 3.0: Dynastic Business Families as Families, Organizations and Networks.” Systems Research and Behavioral Science special issue Organization and Membership edited by M. Grothe-Hammer & A. la Cour. DOI:10.1002/sres.2684.
Kleve, H. & T. Köllner (Hg.) (2019): Die Soziologie der Unternehmerfamilie: Grundlagen, Entwicklungslinien, Perspektiven. Wiesbaden: Springer VS. ISBN 978-3-658-22388-5.
Kleve, H. (2018): Die Unternehmerfamilie der Gesellschaft. Überlegungen zur Systemtheorie einer besonderen Sozialform. In: Familiendynamik, Issue 03/2018, pp. 242-243.
Kleve, H. (2018): Die Organisation des Familiennetzwerks. Management großer Unternehmerfamilien als Ermöglichung von Reziprozität – eine Theorieskizze. In: Zeitschrift für Familienunternehmen und Strategie (FuS), Issue 02/2018, pp. 44-49.
Kleve, H. (2018): Wie Familien Konflikte lösen. In: Private Wealth, Issue 01/2018, pp. 106-107.
Kleve, H. (2017): Verlust und Wiedergewinn des Möglichkeitssinns. Familienstrategische Pfadabhängigkeit aus systemtheoretischer Perspektive. In: Zeitschrift für Familienunternehmen und Strategie (FuS), Issue 05/2017, pp. 170-174.
Kleve H. (2017): Das Tetralemma der Unternehmerfamilie. Skizze eines systemischen Forschungsprogramms. In: Systeme, Issue 02/2017, pp. 224-243.
Kleve, H. (2017): System Compliance in Unternehmerfamilien. Konfliktprävention durch Beachtung elementarer Systemregeln. In: Konfliktdynamik, Issue 04/2017, pp. 294-300.
Simon, F.B. (2011): Die Familie des Familienunternehmens. Carl-Auer Verlag.

RESEARCH PROJECTS AND EVENTS CONCERNING BUSINESS AND FAMILY

RESEARCH PROJECTS

Family strategies over generations
Shareholder competence in family businesses
System theory of the business family
Sociology of the business family
The ‘tripled family’ – large business families as families, organisations and networks
Systemic consulting, in particular systemic structures as a method of reflection and support for business families

BUSINESS AND FAMILY