ViaNorm Management Consulting Inc.
Caferaga Mh. Albay Faik Sözdener Cd.
Cetintas Is Merkezi No:17 Kat:2/B
KADIKOY / ISTANBUL / TURKEY
- (+90 216) 348 48 00
- (+90 216) 338 09 18
Family businesses
" We help you convert all potential shortcomings in your family business into sources of sustainable economic growth. "
Family businesses are of particular importance for us. They play an important socio-economic role not only in Turkey but throughout the world. To express it in numbers: the share of SMEs in United States, Japan and the large part of Europe accounts to 90 to 95% of the entire entrepreneurship and most of them are family businesses. In Turkey, this percentage is even higher. On the other side, most of them cannot maintain this status. Mismanagement and poor performance in mediation of business experience result often in selling or resolution of family businesses.
Despite varying constants, results from different countries turn out similarly: an average 2/3 of family businesses either liquidate or come under the control of a third-party. According to the same analyses, only 5 to 15% of the companies are still family-owned in the third generation of the founding
Family businesses are the driving force for economic and social progress in all economies. Therefore, attention should be paid to the structural fragility of these firms and the advice tailored specifically according to their needs.
The characteristic problems of family businesses can be worth noting in general as follows:- Compared to other types of companies, family businesses have more complex operational structures. This statement may surprise at first glance, on closer inspection, however, it turns out to be true.
- While it is sufficient for a normal company that the management members have a coherent functional perception to achieve the objectives, in a family business, however, the number of the tasks to be undertaken in compliance would raise extremely. To keep the system running, it would now require at each stage to take into account a further dimension: the family. Visually simplified, family ties lead to multiple repetitions of similar operations and the increased complexity of important processes. This additional workload explains the often poor dynamics in family businesses.
- Disputes among related shareholders are not uncommon in family businesses. These conflicts can thoroughly prevent that developed solutions solely in the interests of the company by the management can be implemented. We believe that such disagreements result not only out of personal differences, but originate rather from misguided function allocations within the stakeholders and can be resolved with appropriate functional transpositions.
What factors explain else the structural vulnerability of family businesses? Why does the founding family lose the control of its company or why does it come after a certain period of time even to liquidation? We would like to give a general and a more specific answer to this question.
Firstly, it should be noted that family businesses generally fall into decay for the same reasons as other companies:- Incompetence in early detection of changes in the market and/or in adapting themselves accordingly
- Lack of investment capacity for taking key initiatives
- Incompetency by price-cost calculation
- Weakness in the release of attainable assets
- Attempts to repurchase the company to a second-hand price
- Other deficiencies in management strategies
- Bottlenecks in financing the business growth occur due a blockade of access to the family assets. (The inviolability of the total capital is an almost sacred principle for many families)
- Disability to balance the requirements of the family liquidity and the operating capital.
- Mismanagement in the administration of estates and difficulties in the repayment of the ancestral debts.
- Delayed change of leadership at the top and failures in the timely integration of descendants by the older generation.
- Inability to keep talented, motivated and technically specialized offspring in the family business.
- Family rivalries that prevent a unanimous election of the successor and lead to loss of control.
- Failure in the recruitment and retention of experienced managers outside the family.
- Unresolved tensions between the family, the board of directors and different corporate cultures.
These factors clearly show that the volatility of family businesses is generally based on the conflicting relationship between the capital and the management.
Our approach for a sustainable organisational structure in family businesses:
- As in families, conflicts are inevitable also in family businesses; you should encounter this reality with calmness and serenity.
- Conflicts can accelerate some negative developments, but they can also imply the chance to revise faulty procedures and set them in order.
- The conflict management should find out solutions that are satisfactory for all sides; i.e., solutions corresponding to both the business objectives and expectations of the family.
- Applying effective strategies to optimize business procedures is a determining factor of success for both the family and its business.
- It is important to remember that there are many different solution methods but not a cure-all for all problems.
- Rules of the game clearly defined in advance can prevent many potential conflicts.
With these proposals, we want to encourage you to an alternative approach to problems within your family business and point out that having problems must not always be disadvantageous. Then, a company or a family that does not deal with its conflicts has probably already lost any ability to adapt itself to changes and innovations.
"We help you convert all potential shortcomings in your family business into sources of sustainable economic growth."
