Making sure your business stays a family affair
Family-owned businesses are often referred to as the backbone of the Northern Ireland economy, and rightly so. They employ more than 50,000 people and, in relative terms, there are more family businesses in Northern Ireland than in any other part of the UK.
The largest of the local family businesses are well known, and several are represented in the 2017 Sunday Times Grant Thornton Top Track 250 League Table, including LCC Group, Graham Construction, Lagan Construction Group, FP Mccann, Norbrook, and Wrights Group.
Many family firms will point to strong personal bonds, loyalty, commitment and a long-term strategic view as characteristics that underpin their success and provide a unique competitive advantage.
Fundamentally, however, it is the ability to develop a culture that respects and accommodates the best interests of the business and the needs of the family that will give a family business longevity.
Where the line between family and business interests becomes blurred, both the business and the family unit will tend to suffer. Despite the notable success stories, the long-term failure rate of family businesses remains high, with over 90% of Northern Ireland family businesses failing to make the third generation.
To improve the chances of becoming a multi-generational business, there are several key considerations that family-owned businesses should address:
Communication Strong relationships require good communication. Often within family-run businesses, poor communication can turn negligible disagreements into major conflicts. Appointing a non-executive director or establishing an advisory board to provide an impartial viewpoint will help prevent emotions from clouding decisions.
Financial expertise All businesses, not family-owned ones, should ensure they have an appropriate level of expertise to prepare for growth. A common hazard is not seeking financial advice when needed as often this means looking outside the family.
Conflict avoidance The business environment can often be stressful. Add family relationships to the mix and the potential for conflict increases. Family conflicts need to be avoided or dealt with early. Clear guidance through a written constitution, or similar document setting out how to deal with disagreements, can be invaluable. A trusted third party may be needed for more serious matters.
Talent management Talent outside the family may often be better placed to help run the business. Pay packages that reward the family in excess of ability or performance will decrease staff morale, increase staff turnover and push away key talent.
Succession planning Around 40% of employees in SMES feel the business wouldn’t survive without the founder, so the earlier the succession planning starts, the better. Choosing the right person is one of the most important strategic decisions a family-run business will face. Therefore, if the strategy is to retain leadership roles within the family unit, the importance of nurturing talent identified at a young age cannot be underestimated.
For information or advice, Pearse Mulvenna can be contacted at firstname.lastname@example.org. Grant Thornton (NI) LLP specialises in audit, tax and advisory services
Written guidance can be invaluable