Continuity in Family Businesses

 


Cross-Influences Between Interests and Objectives

By Robert Lafond, C.R.H.A., M.B.A., Pl. Fin.

In a family company, the first succession is particularly important, because it determines whether the company will outlive its founder.  What’s more, close ties between the family and the company make succession a highly emotional experience, which sometimes creates tension and sparks conflict that can lead to the company’s collapse.
 
For these reasons, owners have a tendency to neglect or delay succession planning, which inevitably causes problems that can jeopardize the company’s future. 
 
As with any SME, a family company often depends on the talents of the primary manager, whose departure can be a critical blow. In the first generation, this primary manager is also the founder, whose personality is often the root cause of the lack of succession planning and the crises sparked by his or her death. 
 
Another characteristic of family companies is the close link between ownership and management. There are cross-influences between the interests and objectives of the business and the family. Such influences can be positive to the extent that the company’s mission is aligned with the family’s values, there are strong connections between members of the organization and the family, and the perpetuation of the company’s values and traditions (a unique competitive advantage) is furthered by those connections. 
 
In summary, what sets family companies apart from SMEs in general is the interdependence between the family and the company, and the resulting small pool of potential successors. Cross-influences between objectives and interests are often the root cause of a lack of succession planning, resulting in a delay in starting the transition process. As a result, the owner must plan and promote such a process, in order to safeguard the company’s future. 
 


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