Family business in Europe
There is a high percentage of family business in Europe but only one third of those family businesses will successfully make the transition from each generation to the next (www.economist.com). Succession in a family business is not an event but a process and it involves the transfer of both management and ownership.
Percentage of family business sectors 1 Percentage of businesses PROCEDURE AND METHOD EMPLOYED. The procedures I will follow in this report are as follows. Firstly, I will explain which are the advantages and disadvantages of family-owned firms explaining each of the reasons. Secondly, I will come up to a conclusion and thirdly I will propose some ideas that the government can take to assist family-owned firms.
When the company is owned and managed by family members with common goals and common basic values, it can shortcut much of the agreement negotiations that usually accompanies decision making in other business organizations. When family membersï¿½ minds run in the same channel, the business can run circles around the competition and can reach to be top performers. However, the advantage can be lost when family members lose sight of their common goals and can paralyze the company with conflict.
Insurance, time off and other benefits usually cost a business less when several employees live under the same roof. This advantage again can be lost if family members put individual interest. For example, if the owner has a company car, his wife demands a company car too. Usually there is greater and less stress in dispersing information and getting feedback to and from management when company’s owner and family group are relatively alike and are available for consultation and support. Most family and business interests in smaller midsize companies are best served by keeping in that way.
Many family businesses continue to prosper because they make such good use of the family’s bright minds. The business benefits from the family’s contributions and gives back a sense of accomplishment and pride. For the family-owned business, good governance makes all the difference. Family firms with effective governance practices are more likely to carry out strategic and succession planning. On average they will grow faster and live longer.
Management would not have to defend its strategy to outside investors and securities analysts. It will all be among the family. Part of the competitive advantage is linked to shareholders efficiencies. For example, imagine that risk is perceived as being high, because the shareholders no longer trust each other or do not share common visions for the company or differ on long-range financial goal. In this case they might insist on selling their shares or taking the company public, two actions that could have a potentially negative effect on the company’s future. If shares are among the family members this is rarely to occur.