Family businesses: the questions they need to ask if they are to survive

This article, written as part of an EDHEC-KPMG partnership, was originally published on Linkedin.

Are they different from those asked by managers of non-family businesses? We believe they are. So how can we take them into account and support managers differently?

Because while they remain businesses like any others, family businesses operate in ways that deserve special attention, as we have observed in our respective practices and research. Today, they are part of an environment that has been turned upside down - economically, socially and climatically - while at the same time playing a very active role in the global entrepreneurial ecosystem. In fact, 100% of family business managers now believe that passing on their business will help to create value in the years to come (job creation, international expansion, etc.)* And that ensuring its long-term future is now crucial: how can family members from different generations be aligned to create financial, social and environmental value?

Because preserving one's DNA and transforming oneself is never easy. And that's what the new generations are asking themselves: how can we transform the company while guaranteeing that we retain our cultural capital? How can we reinforce the entrepreneurial approach in more traditional channels? How can we renew the dynamic and reinvent the model while ensuring that the company's DNA endures?

Because there are major issues involved in transferring a business that extend beyond the family circle. These are long-term processes that require long-term preparation. On average, it takes 10 years to transfer a family business properly*. Preparation that takes into account the necessary adjustment of the practices of the new generations to the realities of the business. What types of scenarios and reflections should be initiated on the nature of the estate and its development?
How should the fruits of the labour of those leaving be rewarded, and how should they be supported post-transmission? How should we deal with tax issues, which are considered more complex in the context of an intra-family transfer?

Because the value system at work in a family business is unique. It is part of a context of emotional dynamics that cannot be ignored. And it needs to be shared by the whole family, particularly in order to deal with these emotional issues: How can we map the value system of family members? How can we characterise the quality of family ties and strengthen them? What form of governance should be put in place to make emotions a strength rather than a hindrance to the long-term survival of the business in the hands of the family?

In the light of these issues, family businesses are characterised by additional complexity, which may even be accentuated when a crisis arises.

As a result, these issues cannot be dealt with in the traditional way as in other businesses. They require a sharp and subtle understanding of the major issues facing family businesses, so that they can be better anticipated, prevented and managed.

*All figures are taken from the recent study "Agir pour la transformation des entreprises familiales" published by KPMG in November 2021.

Guest column co-authored by Rania Labaki, Professor of Finance and Family Business, director of EDHEC Family Business Research Centre and Alpha Niang, Partner, head of family business at KPMG France.

...............................

EDHEC-KPMG "Family Shift" : un programme de développement des compétences dédié aux entreprises familiales

Pour toutes les raisons évoquées dans cet article, l'EDHEC Business School et KPMG ont associé leurs expertises dans une formation labellisée « Family Shift », proposant bonnes pratiques, conseils, et parcours d’apprentissage pour les dirigeants et futurs dirigeants qui souhaitent pousser au plus haut le potentiel de leur entreprise familiale. Vous souhaitez en savoir plus sur ce programme Family Shift ? Demandez conseil auprès d’un conseiller KPMG Family Business.