The shareholder base of many family-owned businesses in Germany is growing larger and larger over time. While the extended family itself is gradually losing importance, shareholders are increasingly organizing themselves into clans. In other words, they pool their shares, which enables them to make joint decisions at shareholders’ meetings.
The auditing firm KPMG, in collaboration with Zeppelin University and the Friedrichshafen Institute for Family Businesses, has now compiled an excerpt from the study “Company, Family, Leadership: Leadership at the Intersection of Emotion and Business.” The study was based on 14 interviews with family businesses, followed by a written survey of 85 family firms. The participants were predominantly male, between the ages of 45 and 85, and served as managing partners in their companies.
One finding of the study: Cohesion within existing extended families is significantly greater than in families organized into clans. Consequently, nine out of ten members of extended families see themselves as part of a strong community (clan organization: 77 percent). 96 percent see opportunities to contribute to the business and the family; among members of a tribal organization, the figure is 86 percent.
Furthermore, the study found that just under 82 percent of the entrepreneurs surveyed rate the cohesion within their families as high. In addition, nearly all respondents (97 percent) reported that the family’s bond with the business is very strong. For the study’s researchers, this means that family businesses not only provide the economic foundation of a family but also form its emotional center and foster its identity.
Trust is the foundation of this cohesion, as various previous studies have already shown. Similar to personal relationships between two people, this means that in relationships among business partners, even seemingly minor problems should be addressed quickly. This helps prevent the risk of a conflict arising that seems nearly impossible to resolve.
Trust is one thing; defining and living by shared values is another. For 94 percent of the entrepreneurial families surveyed, a solid foundation of values is the basis for strengthening cohesion within the family business. 86 percent believe that regular, open, and direct communication promotes cohesion.
How, then, does the connection between family, business, and emotional bond work? Let’s illustrate this using the example of a sale: 61 percent of shareholders would sell their shares in the company if the company’s goals, values, and strategies did not align with their own expectations. Furthermore, the younger generation’s interest in the business declines if children, nephews, and nieces are not introduced to the business at an early age. At the same time, the likelihood of selling shares decreases when shareholders are satisfied with the family situation and see themselves as part of a strong community.
Nearly all executive boards (85 percent) consider their communication to be open. Four-fifths of executive teams (82 percent) exchange ideas regularly. However, only 73 percent have a clear division of responsibilities, and 58 percent have implemented a defined decision-making process.
