By definition, a family business is one in which a business family is the majority owner. However, when it comes to the administration and management of the company, the entrepreneurial family can have a varying level of involvement in the corporate governance bodies. In this article we ask specifically what the presence of members of the entrepreneurial family on the management committee should be.
Índice
Functions of the steering committee
The management committee arises from the need to coordinate the different specialised departments that emerge as the company grows. It is made up of the general manager and the directors of marketing, administration, export, production…
This body is the highest executive body of the family business and has a dual function. On the one hand, it promotes collaboration between the heads of the different areas of the company, providing them with an overall vision. On the other hand, it is responsible for implementing the strategies proposed by the board of directors and managing the day-to-day running of the company.
How the entrepreneurial family is integrated into the steering committee
While the board of directors usually consists wholly or partly of members of the entrepreneurial family, this is not always the case for the management committee.
Some family businesses decide that the entire management team should be made up of family members. Others opt for the opposite, forming a team of external executives. Finally, there are others that mix family and non-family members on their management committee. There is no single right decision in this respect. Each family business must choose the right option according to its needs and idiosyncrasies, and all have their pros and cons.
Advantages and disadvantages
When most or all members of the management committee are members of the business family, there is a better natural alignment between the interests of owners and management. However, having mostly family managers also has its drawbacks. Because belonging to a business family is not necessarily synonymous with being a good manager. And personal factors tend to play a greater role in decision-making in family businesses than in other companies. Therefore, it is advisable to implement a process of continuous self-assessment and act accordingly.
The support of the entrepreneurial family for the common project is undoubtedly a valuable intangible. However, it can sometimes work against the professionalisation of the company if not all members have the required experience and training.
Another potential risk is excessive complacency. For example, when all members of the management committee are family members, many companies dispense with the implementation of control and incentive systems. Because these are mechanisms that are often used to reconcile the objectives of owners and managers. However, it is advisable to set up monitoring methods and incentive programmes for family managers as well.
Ultimately, strong family control of the company’s management does not have to be a negative thing. But it is necessary to seriously face the challenges it entails. At Confianz we have been working for years in the field of advising family businesses, helping them to achieve their strategic and business objectives and we would like to accompany you in the growth of your family business. Shall we talk?