There’s business, and then there’s the family business

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.

I grew up in a family business (literally), living in the rooms over a small newsagent shop in Cabra on Dublin’s northside. My late parents worked exceptionally hard, long hours to make a living, and my siblings and I provided free labour whenever required. It was a great place to learn the fundamentals of business.

Many successful firms are husband-and-wife partnerships. Much is written about “co-preneurs” – stories of couples who start up new businesses, with both sharing responsibilities. The usual advice is not to bring personal issues to work and limit talk about the business at home.

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The biscuit business

Today I work alongside my wife, Alison Cowzer, in our investment business called The Company of Food and on a number of start-ups, including the recently opened East Coast Bakehouse, a biscuit business based in Drogheda, Co Louth. Alison also makes investments in small businesses through her role as one of the dragons on RTÉ's Dragons' Den.

Working alongside a spouse has great advantages, but risks of conflict could unsettle a relationship and damage the business. It’s not a life that suits every couple, but it works well for us.

A very common cause of conflict in family businesses is the added stress at the time of generational transition. In the US, about 70 per cent of family businesses are either faill or are sold before they ever pass on to the second generation. Only 10 per cent remain privately held and in control of the third generation.

Sometimes generational transition is very difficult; unhealthy rivalry and inappropriate nepotism can derail a business. In some family businesses, chief executives probably stay for too long. They fail to cope with shifts in technology or, worse, fail to match their skills with the changing management needs of an evolving 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."

Ignoring the obvious sexism, 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.

High-profile conflict

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.

Postscript: When my wife's involvement as an RTÉ Dragons' Den investor was announced last year, I tweeted: "I've been married to a dragon for 20 years and now, at last, the rest of the world knows!" Alison laughed – eventually!

Michael Carey, who currently chairs Board Bia, is managing director of East Coast Bakehouse and chairman of The Company of Food. Twitter @careyonfood.