High price of managing the family firm
Article | 1 July, 2005 02:19 PM | By Scott McCulloch
ICFB is a joint venture between Grant Thornton and the University of Gloucestershire
Just earning a living and keeping afloat is stressful enough. But when you have the responsibility of running your own company – and the waters are muddied by family relationships – the fallout can be catastrophic for your health. Scott McCulloch reports
Stress levels are "reaching boiling point" among many of the world's family businesses, according to findings from the International Centre for Family Business. It found that 44% of respondents believe the family business significantly contributes to their stress levels. Globally, 42% of family businesses have seen an increase in stress within the past 12 months, ICFB says.
"Family businesses are unique and to a certain extent, it is their very nature that causes increasing levels of stress within the business," says John Tucker, a consultant at Grant Thornton. "The role of family members within the business, directly or indirectly, is extremely complicated. Mixing all of these relationships within a commercial context is potentially explosive."
The poll questioned more than 3000 family businesses in 22 countries. Increased competition, demanding customers, cash flow pressures and squeezed profit margins were among the top reasons cited for mounting levels of stress. Terrorism and "family involvement" in the business were also cited.
"The health risks posed by stress are well recognised and while the pressure on family business owners is especially strong due to the burden of running the business and dealing with social and family anxieties, care needs to be exercised to ensure that it does not become a serious detractor to the heath of either individuals or the business," says Paul Andrews, director of business development at ICFB.
He believes wealth being tied in to the business (23%), relations with shareholders (16%), the ownership of the business (16%) and family involvement (13%) are also indicative of how family businesses can be stressful organisations in which to work.
The findings come at a time when just 8% of UK business owners expect to pass their businesses on to the next generation while 58% expect to dispose of the business by means of trade sale, according to a separate survey by Grant Thornton. Globally, 28% of businesses are expected to remain in the family – with 23% changing hands by way of merger and 20% through a trade sale.
According to Barclays Bank, two-thirds of family business owners confess that working with your nearest and dearest can create tension. For couples, the BDO Centre for Family Business distributes a special husband and wife business charter.
Hong Kong, South Africa, Russia and New Zealand were among the top five countries where family businesses experience high levels of stress. Turkey topped the list with 81% of respondents stating their business caused them ­"significant stress". It's easy to see why. In May, Turkish business confidence reached its lowest point since early 2003, when it was battered by the unsettled situation in neighbouring Iraq. "The latest point came on the heels of the 'No' vote on the EU constitution by the French and the Dutch, which subsequently reopened questions regarding the EU and Turkey's prospects for membership," says Andrew Birch, an analyst at Global Insight. But growth in the country remains strong. The latest forecast from the Economist Intelligence Unit suggests GDP will slow from 8.9% in 2004, to a still robust 5.4% this year.
By region, respondents in east Asia logged the highest average level of stress. The figure averaged out to 49% compared with 42% in the North American trade bloc area and 40% in the EU. This is not surprising. All over Asia, management issues tend to be family issues. Especially in countries such as Thailand, Indonesia and the Philippines, almost all companies except former state enterprises are controlled by families, even when listed on the stock market.
Two goals dominate in the world of business – profit and control. Staying focused on these goals where family members are concerned can be difficult, even impossible. The remedy? Andrews prescribes a heavy dose of communication. "Care needs to be taken to ensure that all of the family are aware of the relevant information so that they understand where the business is going and what the plans are."
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Families in Business No21 Jul/Aug 2005
Related terms: grant thornton, john tucker, managing, relationships, stress, Ownership and Management, Governance
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