Perspectives from ISB

Family businesses form the backbone of the Irish economy, accounting for more than 40 per cent of all private sector employment. The benefits of families working together, with uniquely intimate closeness and trust, have provided a foundation for a proven business model. Family business leaders often demonstrate a heightened emotional connection to the success of the enterprise.

In smaller family businesses, an availability of low-cost (or free) labour can make the difference between success and failure. Nepotism, despite its negative connotations, is a necessary and beneficial feature of family businesses, especially during the early stages. Other advantages usually include a flatter management structure, with speedier and more responsive decision-making.

Sometimes generational transition is very difficult; unhealthy rivalry and inappropriate nepotism can derail a business. Managing such transition is not a new challenge. In a famous Harvard Business Review article first published in 1971 (in an era that now seems extraordinarily misogynistic), psychologist and work consultant Harry Levinson wrote: “The job of operating a family-owned company is often grievously complicated by friction arising from rivalries involving a father and his son, or between brothers.”

Levinson’s points are still valid. Realising when it is time to pass the torch to the right new leader is probably the greatest challenge to the continued success of a family business, perhaps more so than accepting the wisdom of bringing in nonfamily to be chief executive.

Despite the best efforts to scope out a path to a desired smooth transition, family businesses do go wrong, as some recent high-profile and sad examples of conflict demonstrate. Still, it doesn’t have to be that way. The Irish food and retail sector has great examples of successful generational transitions. Flahavans Oats, for instance, has been in family control since 1785. It is now run by the sixth generation and showing more innovation than ever in its long history.

Carton Bros, the chicken business in family ownership since 1775, is now in its eighth generation. As part of a recent announcement of new investment that will create 600 additional jobs, Carton also established a food investment spin-off, to be called Carton Sisters, an indication of the possible future potential succession opportunities within that family.

The Musgrave Group, the largest privately owned business in Ireland, has been in family ownership since 1876, successfully reinventing itself under professional nonfamily management.

Literally thousands of Irish pubs, hotels and family farms have resisted the pressures to sell or close. It has been reported that Irish farm land changes ownership, outside family inheritance, every 555 years! Family businesses can make the transition, and the likelihood of that outcome can be enhanced with a structured and thoughtful approach to succession.

Source: Carey, Michael, The Irish Times,

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