The 10 com­mand­ments for fam­ily busi­ness en­trepreneurs

Financial Mirror (Cyprus) - - COMMENT -

Fam­ily firms pre­dom­i­nate across the cor­po­rate land­scape. There is a plethora of trans-gen­er­a­tional fam­ily firms that have made it to the pan­theon of fame: Mar­riots in ho­tels, Fords in cars, Batas in shoes, Benet­tons in clothing, Mars in choco­lates, Gre­go­riou in sausages, Kean in juices, Ia­covou Bros in con­struc­tion, Had­jikyr­i­akos & Sons in re­tail­ing, etc...

Fam­ily busi­ness en­trepreneurs have played a pro­tag­o­nist role in the so­cio-eco­nomic de­vel­op­ment of our is­land’s econ­omy. Now they are stretch­ing their en­tre­pre­neur­ial wings to ex­ploit mar­ket op­por­tu­ni­ties be­yond our ge­o­graphic bor­ders.

Aca­demic re­search con­firms that the fam­ily busi­ness model has the ca­pac­ity to sus­tain busi­ness suc­cess and add value for all stake­hold­ers.

How­ever, stud­ies also re­veal that only one in ten fam­ily firms will reach their third gen­er­a­tion of fam­ily own­er­man­agers.

In or­der to thrive, fam­ily firms need a multi-di­men­sional strate­gic fam­ily busi­ness de­vel­op­ment plan.

This will evolve de­pend­ing on the size of the busi­ness, com­plex­ity of the own­er­ship and busi­ness struc­ture and of course en­tre­pre­neur­ial ap­petite for sus­tain­ing fam­ily con­trol.

In a nut­shell, here are the ten com­mand­ments for the fam­ily owner-man­agers seek­ing sus­tain­able trans­gen­er­a­tional busi­ness suc­cess.

–check­ing com­pat­i­bil­ity with your val­ues (e.g. con­trol, trust about out­siders, at­ti­tudes about risk tak­ing, growth and fi­nanc­ing op­tions etc)

and other riskier growth in­ter­na­tion­al­i­sa­tion etc.)

that is open to or­ganic strate­gies (ac­qui­si­tions,

Fu­elling growth needs hu­man cap­i­tal and sys­tems. As the busi­ness out­grows the fam­ily re­source base, the fam­ily chiefs, will need to em­brace loyal charis­matic non-fam­ily man­agers, and keep all fam­ily [pas­sive and ac­tive] share­hold­ers con­nected to the next stage of growth.

The board of di­rec­tors will need to tune strate­gies and en­sure via man­age­ment sys­tems and del­e­ga­tion, op­er­a­tional is­sues are dealt with ef­fec­tively by ex­ec­u­tive teams.

There is scope to in­tro­duce a Fam­ily Share­hold­ers Coun­cil rep­re­sent­ing all fam­ily mem­bers and units. This group will for­mu­late the Fam­ily Con­sti­tu­tion so that it will reg­u­late the role of the fam­ily in the busi­ness. This is an agree­ment pro­to­col that gives clear guide­lines on con­testable is­sues such as: en­try and exit pol­icy of rel­a­tives; rules for re­cruit­ment, re­ward, pro­mo­tion and in­cen­tives; fi­nan­cial and div­i­dend pol­icy, rules for suc­ces­sion plan­ning, con­flict man­age­ment etc.

The plan will out­line how suc­ces­sion will oc­cur, how to nur­ture and train the suc­ces­sor and of course when the re­tir­ing chief lets go. The fi­nan­cial and tax im­pli­ca­tions of suc­ces­sion need to be con­sid­ered.

for sur­vival and growth and ac­com­mo­dates the liq­uid­ity needs of ei­ther the re­tir­ing gen­er­a­tion or of pas­sive share­hold­ers that need to cash.

terms of cor­po­rate and in­come trans­fer taxes.

taxes,

as

well

Panikkos Poutziouris is Rec­tor of UCLan Cyprus

in as higher

There is scope to in­vest in the ed­u­ca­tion of the next gen­er­a­tion and sup­port the neo-en­trepreneurs with high risk cap­i­tal as they pur­sue alternative en­tre­pre­neur­ial ac­tiv­i­ties.

amongst fam­ily busi­ness to forge part­ner­ships and trans-gen­er­a­tional fam­ily owner-man­agers is es­sen­tial ex­change ex­pe­ri­ences about busi­ness con­ti­nu­ity plan­ning.

Fi­nally, academia and en­ter­prise pol­i­cy­mak­ers can play a vi­tal role in the orches­tra­tion of fam­ily busi­ness fo­rums and en­ter­prise sup­port tai­lored to their idio­syn­cratic Cypriot fam­ily busi­ness cul­ture and mar­ket ex­pe­ri­ence.

This is para­mount to help smaller tra­di­tional fam­ily firms sur­vive in the new com­pet­i­tive or­der and en­able busi­ness fam­i­lies to re­alise their long-term growth po­ten­tial.

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