Maurice Noone: What makes a resilient family business?

By Maurice Noone

The desire to create a sustainable family business is there, so why are so few succeeding? Photo / iStock
The desire to create a sustainable family business is there, so why are so few succeeding? Photo / iStock

If there's one concern that is front and centre for both current family business owners and up-and-coming leaders, it's the desire to build on the successes of the past, and to make the family business continue to prosper and last.

This long-term perspective permeates every decision the business makes, and is often one of the key reasons why the next generation choose to work in the family business in the first place.

This was reflected in the recent findings from PwC's 2016 Next Gen Survey which found 92 per cent of next gen leaders feel they have a responsibility to hand over a sound business to the generation after them.

At the same time though, many family businesses aren't surviving past the second generation, and even fewer are making it to the third. Clearly the desire to create a sustainable family business is there, so why are so few succeeding?

Making a professional family business

Issues will often arise when next gens find themselves focusing too much on 'family' and not enough on 'business'. In the 2016 Next Gen Survey, future leaders revealed they were struggling to cope with the very personal and informal nature of their role and their relationships within the business.

In fact, 32 per cent want to manage the business but don't have a plan in place yet - compared to 28 per cent who have a plan.

An overwhelming majority (88 per cent) are worried they will be spending more time managing family politics, while 69 per cent feel it's hard to separate their family life from the business.

What comes through here is the importance of having a professional family business. This means putting the focus on the business first, having formal assessment measures, a well-developed succession plan and business conversations where family dynamics take a back seat.

Next gens are also responding to this need, with 69 per cent looking to bring in outside managers to help modernise and professionalise the business.

Turning weakness into strength

Family businesses face their own unique set of challenges, from internal politics to the difficulty of succession planning, and it's often next gens who have to face these head on.

However, for many next gens the purpose and culture that comes with a family business is actually part of their competitive advantage. One of our international respondents, Christian Weber from German brewer Karlsberg Brauerei, put it succinctly when he said:

"We are as professional and ambitious as any other company, but we are also value-driven, which means we can communicate to both employees and consumers in an emotional way without it sounding artificial. That's because our culture stems from our family rather than anonymous owners no-one knows."

PwC regional managing partner Maurice Noone.
PwC regional managing partner Maurice Noone.

While the family side of a family business represents a hurdle to navigate, it's often also a source of strength, one that businesses can draw on in order to become more resilient.

Even succession planning, which is often seen as a major hurdle between generations, is an opportunity for organisational renewal. In fact, 58 per cent of our respondents feel family businesses renew with each generation.

Striking that balance between 'family' and 'business' isn't easy. It will be different for every company and will hinge on more than just professionalising the business.

This means using the unique culture that comes with a family business to build resilience and a compelling value proposition so the company can then be handed on to the next generation.

- NZ Herald

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