Monitoring Family Business

BY - Amina Holzer

What is the relevance of family businesses in today’s modern economy? Do certain cultures have higher proportionate shares of family businesses? To what extent are family businesses able to welcome managers from outside? These and other subjects have been the focus of the Family Business International Monitor.

The Monitor was commissioned by the Family Business Network, comprising 2,700 family-owned business members spread over five continents. In 2007, the network undertook a survey of well over 1,000 firms in eight countries encompassing Finland, France, Germany, Italy, The Netherlands, Spain, Sweden and the Uk. The monitor found that family-owned businesses account for between 31% (in the Uk and The Netherlands) and 61% (in Sweden) of total employment across Europe. Most of Europe’s family businesses are still in the hands of first generation owners. If the business had already been transferred within the family, it is most often the second generation that is currently owning and/or running the business. One in nine of family-owned businesses in Europe are expected to be transferred within the next five years. Governments are just beginning to pay attention to family-owned businesses as entities separate from SMEs or privately owned business. In most of the countries surveyed, some aspects of legal framework, particularly inheritance and gift taxes, seem to either favour or discourage the transfer of family-owned businesses from one generation to the next. Do certain European cultures have higher proportionate shares of family-owned businesses? The survey found no consistent pattern and variations pertained to specific countries. While proportionate shares of family-owned businesses are very high in Scandinavian countries, such as Finland (91%), the same applies to Spain, France and Germany. Regarding concentrations of ownership, family businesses with a single owner clearly dominate in Germany (83%), Sweden (70%) and The Netherlands (69%). In the majority of European countries, however, most of the participating businesses are owned by several family members.

INSIDE OUTSIDE
But do families fully owning their business bring in non-family managers? In France this is rare with 44% of businesses being fully family-owned, and nearly the same proportion (42%) being family managed. In The Uk, by contrast, 51% of businesses are fully family-owned while 45% are family-managed. Part of the handover process also involves a temporary period of joint ownership between generations. This is especially the case in Finland where 55% of businesses that have been transferred are held by both the first and second generation family members. There also appears to be a shortage of potential successors within these owner-families. In only three of the eight countries surveyed will majority ownership be transferred to other family members. Moreover, family business owners do not always intend to pass their business on to their children. In five of the eight countries, the majority of those who plan to transfer or sell their business do not have their own family members in mind for future ownership. In France and Spain, only around one in four family-owned businesses are likely to be transferred within the family (26% and 27% respectively), while this number was slightly higher in Finland (36%), Sweden (38%) and in the Uk 39%. In Germany and Italy (both 78%) and The Netherlands (66%), ownership will be transferred largely within families.

[W  fbn-i.org]

Published in the hard-copy of Work Style Magazine, Spring 2009