Some of the world’s leading businesses were started by families, through investing savings and dedicating time to building an entrepreneurial venture. South Africa has many examples of successful family-owned businesses, such as leading insurance group, Hollard and retail chain Pick n Pay. Sanjeev Orie, CEO of Value-Adds at FNB Business gives insight on the basics to building a successful family business. “The success of a family-owned business largely depends on the commitment of the family members involved in the business. Family enterprises predominantly demand ‘all or nothing’ approach as the entire family’s livelihood often depends on the success of the business.”
“Unlike decades ago, approaches to family-owned businesses vary with every enterprise. The focus has been shifting towards holding ownership instead of having family members operationally involved in the business. Involvement would then be at a board level or top management where the focal point is broader business strategy,” he adds.
Orie says even though families vastly differ in approaching a family-owned enterprise, there are still those which remain hands-on, especially when the business is still relatively new or small. “Whether a family is actively involved or not, it is important to set a blue-print of how the business will operate.”
He recommends the following ways to avoid challenges which could destroy a family business:
Be clear on ownership
- Ownership within family businesses could become a major issue if it is not made explicitly clear (and in writing) who owns what. In cases where this is not clear, the business could suffer as everyone will feel that they have equal rights to the business’ assets.
- It is important to have one or two people (at most) to take charge of all business affairs and make important decisions. The decision-maker/s could always consult when there are far-reaching decisions to be taken, such as expanding or downsizing.
Clarify roles through job descriptions
- If family members are actively involved in running day-to-day activities of the business, it is necessary to clarify roles and have job descriptions so that everyone is clear about what they need to be doing.
- Family members are bound to have an opinion on how the business should operate. In a case where the person running the business is not part of the family, it is important to channel opinions or suggestions in a manner which does not seek to interfere or undermine the decisions of the management team.
- Succession is one of the biggest challenges often faced by family businesses. It is essential that the family has a plan in place to ensure seamless transition and change of leadership when such time comes.