A recent survey by the Erasmus Centre for Family Business revealed that, when a family business is passed on to the next generation for the first time, in nearly 70 percent of all cases this will result in the company’s demise. A common cause is company founders who continue to wield excessive power, preventing the new generation from developing their talent and managing the business effectively. Joost Vat, a consultant and partner at the family businesses division of consultancy firm BDO Adviesgroep is all too familiar with the problems involved in business succession. Yet he has also encountered plenty of family businesses that have continued to flourish under the stewardship of the next generation, with the change of hands paving the way for strong growth and more professional operations.
What is the first thing that comes to mind when you think of the word ‘talent’ in combination with ‘family business’?
“People who work for family businesses tend to stay there for many years, which means that talent and knowhow are preserved for future generations. That’s a very powerful asset that many family businesses have in common. But at the same time there’s an inherent danger in that as well, because the skills that are relevant today may be made obsolete by new developments tomorrow. So the first question you need to ask is: are family businesses really critical enough when it comes to their employees’ personal development and are they able to make the right decisions when it comes to promotions, transfers and layoffs? Then, of course, there is the question of whether there are family members who have what it takes to succeed in business. Generally speaking, families are getting smaller, which also reduces the chances of there being someone in the next generation who is willing and able to take over the business.”
Why would a successful family business have trouble attracting talent?
“Family businesses tend to be a little different when it comes to their approach to decision-making. The family members will talk shop over their Sunday-morning breakfast, for example, deviating from earlier business decisions that were made in a more formal setting. Some talented employees might be put off by that type of erratic decision-making. On Friday afternoon they might think: ‘Right, this is how we’re going to do it’, only to find out the following Monday that the family have decided differently. We see time and again that key figures end up leaving family businesses precisely for that reason. Then there’s also the fact that, when you work for a family business, chances are slim that you’ll ever end up in the boardroom, if that’s what you aspire to. For some high potentials, that could be a reason to only work for a family business for a year or two before moving on – or to rule out the option altogether.”
The flip side is that working for a family business can be much more personal than working in other companies. Doesn’t that count for something?
“Sure it does! Many family businesses rank family values very highly in their code of ethics, and this extends into their business operations. If that’s something that employees want in their work environment, they’ll probably feel very much at home, which also means they’re likely to go the extra mile for the company. And that’s completely unrelated to pay. Family businesses can use their family identity to make themselves more appealing to potential employees; it can give them an edge in the war for talent.”
