Role of Family Governance in Bringing the Next Generation Close to the Family Business

Abstract

In terms of family business continuity, succession remains one of the most pressing challenges for business-owning families. According to statistics, only 10 % of family businesses survive through the third generation of ownership. Nonetheless, research focusing on next generation integration and supporting communication practices is scarce. This thesis is a case study of next generation integration in a family business currently in its second generation of ownership (later "the case Family Business"). The purpose of this study is to identify ways in which the next generation has built its relationship with the case Family Business, and what role formal communication practices (later "planned communication") have played in that process. The theoretical framework consists of theories that explain the distinctive fea- tures of family businesses, their development over time, and the subsequent loss of natural communication. Family governance is presented as a solution to reintroduce communication into the family business system and manage the increasing family complexity. The relationship between the next generation and the case Family Business is analyzed with the help of the stakeholder communication model. Finding suggest, that next generation members build their relationship with the case Family Business through the same dimensions that constitute a family business: family, ownership and business. Furthermore, touchpoints to all three were needed in order to achieve a strong stakeholder relationship. The findings also highlight the role of family governance in next generation integration. Although the next generation members’ immediate families remained their most important link to the Family Business, the role of planned communication was found to be significant and growing. Planned communication was found to enable ownership talk, create shared mean- ing about the business, increase overall communication, promote equality, and increase the sense of togetherness within the business-owning family. Based on this study, family governance and planned communication have been beneficial in terms of bringing the next generation closer to the Family Business.