Owning and running a family business can be a rewarding experience, but it also comes with its own unique set of issues and challenges.
In addition to all the usual concerns besetting a company in Scotland, family businesses face the additional complications inherent in working with other family members, and the pressures that come from trying to ensure the business is around for future generations.
However, these challenges are not insurmountable, and with careful planning and good communication, together with the help and advice of trusted business advisors, family businesses can successfully overcome the difficulties as they arise.
One of the biggest challenges facing family businesses comes from competing family and business relationships.
All families have their share of tensions and it can be difficult to keep these out of the workplace. Family members working together have a lot more history to their relationships than normal work colleagues would have, and old rivalries and grudges don’t magically disappear when work starts.
Following a work hierarchy can also be difficult. Most workplaces have managers and subordinates and it can be difficult to reconcile this with normal family relationships. Issues can also arise if one family member isn’t pulling their weight - performance managing a family member, or ultimately having to dismiss one, is not easy.
Deciding on the role different family members should take within the business and what remuneration they should receive can also present a challenge. Does a close familial relationship guarantee a role at the company, or are relevant qualifications and skills required first? Is remuneration based on company profits, or are salaries based on equivalent roles within the market place?
Changes in technology and businesses practices can be a common cause of tension in family businesses. The older generation can be reluctant to change their way of working, which can cause frustration for the younger generation who are eager to embrace the latest methods.
Accusations of nepotism
Family businesses that also employ non-family members can sometimes face resentment from these employees if family members are given jobs or promotions they do not appear to be qualified for. To avoid accusations of nepotism these firms need to ensure recruitment and promotion procedures are open and transparent.
Undoubtedly one of the biggest issues facing family businesses is succession planning
i.e. planning how control of the business will transition to the next generation.
Figures quoted by the Family Business Institute
in the US show that a company's plans for the future don’t always translate into reality. It says that only around 30% of family businesses will survive to pass on to the second generation, 12% to the third and only 3% make it into the fourth generation or later.
Lack of effective succession planning is thought to be one of the main causes of failure for family businesses, yet research
suggests that a worrying 43% of UK family businesses don’t yet have a succession plan in place.
One reason why businesses put off succession planning is a fear of causing a rift in the family. The current senior management can be reluctant to step aside and hand over control, while the younger generation don’t want to press the issue and appear to be hurrying their older relatives out the door. Unfortunately, by the time the older generation realise they do need to step aside it is often too late – effective succession planning takes time and should be started as early as possible.
Meeting the challenges
However, despite all these challenges, family businesses are undoubtedly a very successful business model, with many growing from strength to strength across the country. The very nature of being family-based means there is an inherent sense of trust and goodwill that is not often replicated in other business, and a determination to succeed for the benefit of current and future generations.
Contact our Family-Run Business Lawyers in Edinburgh, Scotland
Murray Beith Murray has acted as trusted advisors to many family businesses, through successive generations. Our expert solicitors are ideally placed to help you manage the various challenges that running a family business can present, and to work with you and other business advisors in a collaborative way to achieve the greatest success possible for your business. For more information then call us today or complete our online enquiry form.