The biggest challenge family businesses face is managing generational change in a healthy and sustainable way. So how should generational change happen in family businesses? In this article, we'll answer the question of what a family business is and cover the generational-change process, the concept of fractional leadership and examples of successful generational transitions.
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What Is a Family Business?
Family businesses are enterprises that form the backbone of the Turkish economy, standing out with their deep-rooted pasts and strong values. Today, a large portion of the companies operating in our country are family businesses, and these companies play a critical role in terms of both employment and economic growth.
On the other hand, the questions of what a family business means and what a family business is are quite important, especially for new-generation entrepreneurs and those who want to take on a management role in family businesses. Family businesses are enterprises usually owned and managed by a family, where family members play an active role in decision-making processes. In these companies, the majority of the shares belong to family members, and there are usually family members in the management ranks too.
What Are the Characteristics of Family Businesses?
Among the most distinctive characteristics of family businesses are long-term thinking, commitment to family values, flexible decision-making processes and a strong sense of belonging. However, intra-family conflicts, a lack of professional management and the difficulties experienced in generational change can also complicate management processes in family businesses.
Research and industry reports in recent years show that a professional management approach and institutionalization are essential for the sustainability of family businesses. Especially in intergenerational transitions, transferring the leadership role in family businesses to the right people at the right time is of vital importance for the company's future.
The main common points of family businesses are:
- In these companies, the concepts of business and family are seen to be intertwined.
- A reflection of that family's culture is usually seen in the family business.
- When family relationships get mixed up with business relationships, various problems can arise.
- During generational changes, it's common for disputes and disagreements to arise in management.
The Generational-Change Process in Family Businesses
First of all, generational change in family businesses should not be seen merely as handing a seat over to someone else. In this process, transferring the company's culture, values and vision to the new generation is an important point.
A. Fatih Tamay, a member of the ISO Family Businesses and Institutionalization Working Group and one of Platin Yaka's pioneering mentors, says: (you can also reach his profile here)
“The age is changing very fast! We must try to grasp the new age and adapt to it. For family businesses too, it's time for change and transformation in a planned way! If you're saying ‘I'll start when the time comes,' the time is now!”
Emotional difficulties can arise during the generational-change process. Because the founding member who made the first venture in the family business knows the business very well but can often fall short when it comes to renewing themselves. The new generation, with its modern management approach, thinks that some changes need to be made in the company's overall operation.
In short, perspectives, management styles and expectations are seen to differ between the founding generation and the new generation. Now let's take a closer look at the generational-change process in family businesses.
Is Generational Change Necessary in Family Businesses?
Change is inevitable in the business world. Technology, market dynamics and customer expectations are constantly evolving. Younger generations joining company management with the innovative perspective and digital competencies the age requires increases the competitiveness of family businesses.
As stated in the seminar titled “Institutionalization in Family Businesses,” as well: “According to some studies conducted abroad, family businesses see themselves as the root cause of problems arising from their own internal dynamics and conflicts.”
Steps of Generational Change
Did you know that 80% of the companies that shape the world are family businesses? Also, one-third of the world's 500 largest firms are family firms.
Now let's examine how generational change should be done in family businesses:
1. Family Core Guide: A company/family guide should be created that clearly defines family members' roles and responsibilities in the business, the sustainability of professional management and the participation of new generations in the business process.
2. Training and Mentoring: To prepare new-generation leaders for business processes, pioneering platforms such as Platin Yaka, which provides access to leaders, should be examined, and training programs and mentoring processes should be implemented.
3. Open Communication: Intra-family communication channels should be kept open, and expectations and goals should be shared transparently.
4. Professional Management: It is essential to work with professional managers from outside, and management processes in family businesses should be strengthened.
Please Note: During the generational-change process, taking objective and professional decisions for the company's sustainability is just as critical as taking emotional ties and intra-family relationships into account.
What Is Fractional Leadership? Its Role and Advantages in Family Businesses
Leadership in family businesses has become too complex to be carried on the shoulders of a single person. This is where the concept of “fractional leadership” comes in. So what is fractional leadership and how is it applied in family businesses?
What Is Fractional Leadership?
Fractional leadership is leaders specialized in a particular field contributing to the company's management processes not as a full-time executive but for a specific period and scope. In other words, according to the company's need, professionals experienced in areas such as finance, marketing and human resources lead the company for a certain period.
On the other hand, fractional managers carry many responsibilities in family businesses, from developing and implementing high-level strategies to making critical decisions. Their responsibilities include monitoring financial performance, creating and implementing strategic plans, managing company policies and leading senior management teams.
The Advantages of Fractional Leadership in Family Businesses
Let's examine the benefits of the concept of fractional leadership in family businesses together:
- Management in family businesses can sometimes become difficult due to family members' lack of experience. With fractional leadership, by getting expert support from outside, rapid development can be achieved in the areas where the company is lacking.
- Fractional leadership gives the company an objective and impartial perspective that can see blind spots.
- Instead of employing a full-time senior executive, getting expert support as needed reduces costs.
- A Bridge in Generational Change: Fractional leaders can act as a bridge between the old and new generations during the generational-change process, transferring knowledge and experience.
Especially during generational-change periods, the “fractional leadership model” lightens the leadership burden in family businesses and contributes to a healthier transition.
Examples of Successful Transitions
Family businesses that have successfully achieved generational change offer inspiring examples both in Türkiye and around the world. These companies have achieved sustainable growth by structuring management and leadership processes in family businesses correctly.
Examples from Türkiye
- Koç Holding: One of Türkiye's largest family businesses, Koç Holding has demonstrated the importance of institutionalization and professional management by carrying out generational change in a planned and gradual way.
- Eczacıbaşı Group: Another example that successfully completed generational change with a family guide and corporate governance principles.
Examples from Around the World
- Walmart (US): The Walton family ensured sustainability by working together with professional managers while transferring the company's management to new generations.
- BMW (Germany): The Quandt family supported innovation and growth by including professional leaders alongside family members in the company's management.
Generational change in family businesses is a critical turning point for the company's future. To manage this process successfully, you can easily get professional consulting and mentoring support through Platin Yaka.
Frequently Asked Questions
What is a family business?
If you're wondering what a family business means, in its simplest form it is an enterprise where the ownership and/or management largely belongs to a family. Usually, different members of the family are involved in the business over one or several generations. Many successful companies in Türkiye are based on a family structure, and these companies are in a more advantageous position than multi-shareholder companies in terms of meeting their financial needs with their own resources. It offers advantages such as trust among family members, fast decision-making and long-term thinking. However, challenges such as moving away from professionalism and intra-family conflicts can also be experienced.
How is a family business established?
The question of how to establish a family business is one of the topics entrepreneurs research most. First, you should clearly share your business idea and goals with family members. During the company's establishment phase, you should determine in which roles family members will take part and how responsibilities will be shared. After preparing the documents required for the official establishment of the company, you should register with the trade registry. In addition, creating a written family guide on intra-family communication and division of labor is quite useful for preventing disagreements that may arise in the future. For success in family businesses, it's very important to keep both family bonds and a professional business structure in balance.
What is fractional leadership?
The question of what fractional leadership is comes up frequently, especially in growing family businesses. This form of leadership is based on a system in which a leader contributes to the company for a specific period, a specific task or a particular goal. Fractional leadership is an effective method for sustainable success, especially in generational transitions and during a company's growth periods.
How do family businesses become successful?
There are some basic tips for success in family businesses. First, keeping intra-family communication strong and being open is very important, because when problems accumulate, they can grow. It's beneficial not to compromise on professionalism in the company's management and to get support from experts outside the family as well. Ensuring transparency in financial matters and using the company's own resources efficiently provides a great advantage to family businesses. In addition, making a clear division of labor among family members and defining roles ensures that work doesn't get disrupted and that relationships stay healthy.
If you're in the generational-change process in your family business, take a step today to turn this process into an opportunity. The road to success runs through a strong vision, open communication and the right leadership! Sign up to Platin Yaka now.
