Mixing family and business: Recipe for disaster or match made in heaven?
From small grocers to Walmart, family firms face unique challenges and opportunities
Eric Clinton, Martina Brophy
From your morning cup of Barry’s Tea to the Flahavan’s Porridge Oats you ate for breakfast – possibly sourced from Dunnes Stores or SuperValu – to your office heater made by Glen Dimplex, family businesses are all around us.
According to the latest figures from the DCU Centre for Family Business, sourced from Central Statistics Office data, family businesses account for 69 per cent of Irish-owned businesses in the services sector.
The landscape of indigenous Irish family businesses varies in size and growth ambitions, with firms demonstrating their ability to compete both nationally and on the global stage.
While awareness of this sector has risen, family businesses’ collective contribution to the Irish economy is perhaps underrated, as are the characteristics that make family businesses unique.
What makes family businesses unique?
Family businesses have unique opportunities and challenges that emerge from one important differentiating factor – family involvement.
“Survivability capital” is a term associated with family businesses and their ability to endure adversity. Going above and beyond is often a feature of those who work in family firms, due to family businesses’ innate ability to connect staff to the family mission in a tightknit working environment.
Glennon Brothers, a 104-year-old family owned and managed timber processing firm, experienced a major fire in 2004 that destroyed their production facility in Longford. Both family and non-family banded together, as 30 employees voluntarily relocated to Fermoy, Cork, to run their other facility on a double shift. As testament to their efforts, production fell by only 5 per cent in the following year.
Family businesses are also inclined to think long-term for a range of reasons; a desire to be multigenerational being an important one. At 200 years old, Flahavan’s is one of Ireland’s oldest family businesses. Its longevity is down to the family’s ability to innovate for a changing market while retaining time-honoured traditions and values. In 2013, for instance, Flahavan’s partnered up with McDonald’s to become the exclusive porridge oats supplier to the fast food restaurants nationwide.
Finally, family businesses are significantly embedded in their communities, providing employment, working with local suppliers and sponsoring community initiatives, with many family businesses sponsoring GAA teams across Ireland.
Trading on the family name
Recent research conducted by global public relations firm Edelman revealed that family businesses are the most trusted of any business-type worldwide, according to 75 per cent of those surveyed. Fifty-one per cent of respondents indicated that being a family business is important to purchasing decisions.
Heritage is a huge strength of family businesses and family affiliation can be levereged to connect with consumers. Think of “Old Mr Brennan” of the family company, Brennans Bread, Keogh’s crisps made from the potatoes grown on the family farm, or the Keelings Group that has progressed from selling fruits and salads to local Dublin markets in the 1930s to growing and sourcing fresh produce worldwide.
The Love Irish Food campaign has helped to mobilise support for buying locally, and Irish consumers are increasingly conscious of food traceability, interaction with the seller and support for smaller producers. Family businesses stand to benefit from this sentiment, which puts them at an advantage over foreign multinational producers.
The challenges of mixing family and business
All businesses face adversity but family companies have to contend with additional challenges unique to companies owned and managed by families. They can face difficulty in recruiting non-family talent. Non-family managers refer to the glass ceiling in family businesses, where the CEO position is predominantly reserved for family successors only.
Since shareholding is typically held within the family, salaries for non-family staff need to compensate for this in order to attract and retain talent.
From minor differences of opinion right through to major family events such as death or divorce, family dynamics can challenge the company. And succession can be one of the most turbulent milestones in a family business.
According to a PwC 2016 Irish Family Business Survey, half of Irish family businesses admit to having no succession plan and only 14 per cent have a plan that is robust, documented and communicated. While trust and effective communication are key, formal structures and agreements (for example, family constitutions) are critical to family businesses successfully navigating family dynamics.
Family businesses not only survive, they thrive and count among our most successful indigenous companies. With proper planning and structures, family and business can, and do, mix well.
Dr Eric Clinton is an associate professor in entrepreneurship at DCU Business School and director of the DCU Centre for Family Business. Martina Brophy is a research assistant at the Centre for Family Business