Family businesses have a lot going for them: high levels of quality and service, committed and satisfied employees, robust results and sound financial buffers. Not all of them are equally successful of course, but on the whole their performance is significantly above average. An important fact to consider in times of corona or other crises! The question, though, is how these strengths can be passed on to a new generation. A transfer of ownership means letting go, and this is never easy. Still, letting go can be intensely liberating.
We support organizations in various kinds of transitions. Reasons to seek a transition vary from the desire to strengthen the organization by scaling it up (or down) to a family’s wish to transfer ownership to a new generation or rearrange ownership ratios. We know the challenges that each type of transition may pose.
In a nutshell, the history of a successful family business goes through three major stages: first, the stage of establishment and initial growth; second, the development of a professional administrative structure; third, the consolidation of the organization. Let’s take a closer look.
Stage 1 – Establishment and growth
Founders of a family business are true entrepreneurs: they are specialists in their field and have a talent for making life easier for their clients. Typically, they are intensely passionate about their business. They are willing to work round the clock, and they have an excellent sense of the needs of their markets. Within a relatively short time they are able to set up their organizations, hire people and grow the business. This combination of expertise and commitment is a key factor for the success of a newly established family business, along with the founder’s direct involvement in every aspect of the day-to-day operations. As the organization continues to grow, the founder will gradually start to transfer responsibilities to employees, while always retaining some level of control.
Stage 2 – Development of a professional structure
At some point in its growth, a family business will reach a point where it has to step up the level of professionalism in order to remain manageable. Often this goes hand in hand with the decision to expand. As the order book fattens and the level of complexity increases, this is often the moment when companies call in our services in support of process optimization and the development of a culture of ownership, awareness and result-orientation. The key questions we help them answer are: What do our clients really need, and what is their perception of the company? What can we do to best meet their needs? What are we doing right and where could we further improve? Together with them we set out a course that will help the organization formulate an answer in response to its chosen market demand. This is the starting point for the transition process. Next, we work closely with the organization to develop a professional structure with all the necessary job profiles, including a clear definition of competencies and targets. For the sake of transparency, we lay down the whole process in writing.
Stage 3 – Consolidation and confrontation
For the children of a founder, the family business is an intrinsic part of their life. Many participate in the operations from an early age. Those who decide to make the business their career may venture out to get an education and gain experience elsewhere. When they return, they bring fresh energy into the organization. However, when this new generation shows a talent for leadership and assumes management positions, tensions may arise. Unlike other members of the organization, they are more likely to speak their minds and oppose traditional family views.
Transferring responsibilities to this new generation poses a unique set of potential challenges. The founder may recognize the need for professionalization and a streamlining of processes, but may be reluctant to give up his involvement in day-to-day operations. If at all possible, he would still be crafting his quality products himself, and also be making personal visits to all his clients. But in a mid-size organization this is simply no longer feasible. At the same time, the new generation claims all the necessary room to operate, but inevitably lacks the level of expertise and the innate qualities that were key to the founder’s success.
Gradually, the realization will dawn that the founder needs to let go of some (or all) of the day-to-day management. Our role in this is to support the organization as well as the family in their establishment of a professional administrative structure. The underpinning principle is that it is imperative to have the right people in the right positions. Day-to-day management doesn’t have to be in the hands of the founding family, but their experience and expertise will at all times play an important role. New structures, new roles for the founder or the founding family, a transfer of ownership to the second or third generation – the steps that characterize this stage can trigger strong emotions, but they are vitally important for further growth.
Multi-track approach
In our Next Level approach, we simultaneously address process optimization, the cultural transition and the transfer of ownership. Successful transitions are guaranteed to add value to the organization. At the same time, we support the family in the transfer process and the establishment of an administrative structure. This way, we transform family businesses into professional, flexible and future-proof organizations in which multiple generations collaborate in an effective manner.
It’s important that founders and their families are prepared to let go and thereby create room for future generations. Perhaps they can take inspiration from this Loesje slogan: ‘If you let go, you’ll have two hands free to seize the future’. Based on our experience, that is absolutely true.
Would you like to know more about H+C, successful transitions in family businesses and the effective collaboration between generations?
Call Henk Hauptmeijer at +31 (0)70 346 92 05 or + 31 (0)6 53 20 6 731
or Rob Noorland at +31 (0)6 27 17 68 86 for more information and relevant references.