Family firms in the 21th century
By Pauline van de Voorde
I had to come up with an interesting topic for my bachelor thesis. Due to my father’s entrepreneurial skills I came into contact with family firms early in life. He started his own business 10 years ago and the change exists that I will take it over if the opportunity is still there. From that standpoint I started thinking about what makes a family firm so different from other firms. My bachelor topic was established. Family firms have been big players in the market over decades, for example the Rothschild company is one of the oldest family firms that is still in business. The questions what family firms are and why they are so special are being addressed in this article.
There are so many definitions of family firms that it is almost impossible to pick one. The main thing all definitions have in common is that the business has some influence of a family. Also the need to continue the business if much higher when it comes to family firms than non-family firms. When doing research into family firm definitions I came to the conclusion to form my own definition to make sure it addresses all relevant aspects that I think are needed. A family firm according to me is: a business that shares the vision of the family and that vision also influences the decision making process.
Then the question arises how a family firm differs from a non-family firm? And is it a better form of doing business than other firms? Almost ⅔ of all firms worldwide can be described as family firms, so they must be doing something right you could say. The main point that distinguishes a family firm from a non-family firm is the family component. Because one or more family members are involved in the day-to-day activities, the culture in such a firm differs. People that are not part of the family don’t necessarily have the natural motivation to go the extra mile for the firm. Family members see it as their duty to keep involved in the firm and most importantly keep the business going. This cultural difference is one of the advantages family firms have. The family is determined to transfer the firm to the next generation.
Heineken for instance is the biggest international family firm the Netherlands has. Not only are they the biggest family firm our country has, but also the most profitable. If that’s the case because of the strategic decisions they have made of because of the product they sell shall we leave aside ;). Also thanks to the Dutch students, Heineken had a turnover of 20.511 million euros in 2015 so you could say the company knows how to operate in the beer market. Compared to non-family firms Heineken is number 10 on the list of biggest companies, so still a big player when looking at the whole Dutch market.
If family firms will be as popular as they are now is difficult to say. The succession process keeps getting harder and harder which makes it difficult for family firms to survive. Family members are not always willing to take over the business as in the past it was more obligated for family members to do so.
With the knowledge of my Bachelor thesis and the future challenge of writing a Master thesis, an interesting topic for me to research came to mind: successful succession within family firms. What is the best strategy for a family firm to obtain when it comes to business transition? The answer I will be investigating is conducted in collaboration with the Rabobank. So if you want to know the answer, stay tuned!