Mak­ing sure your business stays a fam­ily af­fair

Belfast Telegraph - Business Telegraph - - Analysis & Company Report - By Pearse Mul­venna, As­sis­tant Man­ager, Au­dit @grant­thorn­tonni

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 pearse.mul­ Grant Thorn­ton (NI) LLP spe­cialises in au­dit, tax and ad­vi­sory ser­vices

Writ­ten guid­ance can be in­valu­able

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