CORPORATE MANAGEMENT
IN FAMILY BUSINESSES

STRATEGIES, LEADERSHIP AND ORGANISATIONAL STRUCTURES IN FAMILY BUSINESSES


Every family business is a unique entity with specific resources and competitive advantages because of its particular history, organic growth and long-term orientation. This uniqueness is the product of numerous interactions between the company and the proprietor family, which, over the course of time, give rise to distinctive circumstances on both sides. These particular conditions mean that standard ‘textbook’ solutions do not suit a lot of family businesses. One question is whether and how this uniqueness can be made sustainable in the long term – with all its performance benefits, as well as the risks which cannot be ignored. Companies grow and adapt to new challenges from their customers and markets. They continuously refine the things they offer so as to remain competitive and expand. The longevity of family businesses is based on a constant change in strategic direction, leadership and organisational structure, chosen legal form, and in the way the business and its shareholders work together in governance. The latter can involve installing a supervisory or advisory body; then there is the extent to which family members may or should be represented in it.

 

(Video available in German)

PATRIARCHAL LEADERSHIP – WHAT IS IT GOOD FOR, AND WHEN DOES IT REACH ITS LIMITS?


The founding history of family businesses is inseparable from the particular quality of its leadership configuration and associated management practices. Founders shape everyday decision-making by the way they exert influence, the way they communicate and the values they hold, and this gives rise to an unmistakeable culture of cooperation.

In the start-up period, a clear division of work is established between the top of the company and the rest of the business. All of the major decision-making functions are gathered at the top. The other areas of the business and its management levels concentrate on operative processes and can dedicate themselves unconditionally to the activities of performing and achieving regular business. A division of responsibilities develops step by step around people who perform well and who, by embracing responsibility, can develop and apply their interests and aptitudes.

The benefits associated with such structures are now largely undisputed: short decision-making channels, low-cost communication, bureaucratic freedom, speedy, flexible responses, resources used sparingly throughout, in-house talent lined up to fill positions as they are vacated, and so on. Management and organisational circumstances like these can quite easily be maintained over long periods of time and changes of generation. But under certain circumstances they can reach their limits and endanger the continued successful progress of the business.

 

MOVING INTO A POSTPATRIARCHAL ERA OF CORPORATE MANAGEMENT


If family businesses grow quickly over a long period, if they execute large takeovers, if they become significantly internationalised, if their business activities become significantly more diverse – in short, if increased complexity in the business begins to dramatically overstrain accustomed methods of resolving problems, then it may be time to consider fundamental changes to management and organisational structures.

This change demands systematic reconsideration of the entire organisational design, a careful rethinking of fundamental business processes (considered in terms of customer benefit), restructuring of the organisation and the bundling of responsibilities in it, and finally the development of an understanding of leadership which permits the sharing of entrepreneurial responsibility between multiple pairs of shoulders, strengthens collaboration within and between different levels, promotes an appointment and recruitment policy based around competence, and much more besides.

Changes like these take time. And above all, they demand personalities at the top who seriously want such far-reaching rebuilding to happen, and who have the stamina to steer such processes of change with a calm yet decisive had. Generational change often offers a window of opportunity in which these developmental steps can be taken credibly and with sufficient energy.

Such a transformation process often begs the question of whether it is perhaps appropriate to consider a competent supervisory body, and to discuss how family shareholders want and may relate to such postpatriarchal structures.

 

LITERATURE (SELECTION AVAILABLE IN GERMAN)


RESEARCH PROJECTS


  • Siblings in the management of family businesses – opportunities and risks in this leadership configuration.

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