Changing the Driver While Speeding in Family Businesses

Recently, a sentence in a book I was reading out of boredom prevented me from regretting buying it. After all, even if it was just one sentence, that 240-page book fulfilled its purpose by leading me to think differently, gain new insights, and further improve myself. The sentence was: “You cannot change your ancestors, but you can do something for your children and grandchildren.”

Approximately 90% of all companies worldwide are family-owned businesses. Whether they are run with corporate structures, managed professionally, or have publicly traded shares on various stock exchanges does not change this fact. For example, the world’s largest retail chain, Walmart, is a family-controlled business, and so is Carrefour, one of France’s largest companies, which also operates in the Turkish market. In particular, the luxury bags, clothing, and accessories brand loved especially by women, Louis Vuitton, and the cosmetics giant L’Oréal are both companies owned by different French families. Michelin, known worldwide as a tire brand, also belongs to another French family. Major automobile brands such as the American Ford, South Korean Hyundai, Italian Fiat, and German BMW and Porsche are also family-owned businesses. After all these examples, it is worth noting the common feature these companies share: “sustainable success.”

In family businesses, there is a fundamental principle that top management must adopt and continuously ensure is implemented: the company is not for the family. Until a certain level of capital accumulation is reached, of course, the trade conducted and the profits earned may serve the family. However, for the sustainability of success in the company, the essential mindset is to embrace the principle that it is not “the company for the family,” but rather “the family for the company.” If a family member is not capable of properly managing any position within the company, they should never be employed there. Separating family inheritance, shareholding rights, and related entitlements from operational roles, family members who do not actively work in the company should not receive salaries in the same way as those who do. In order to prevent the cliché cycle of “the father builds, the son expands, and the grandson consumes,” and to ensure businesses that move confidently into the future, it is essential to establish a family constitution and to create a family council—separate from the board of directors—that governs family matters and the family’s relationship with the company. A family constitution should also include provisions stating that shareholders’ ownership percentages cannot be changed without their consent, as well as the rules they must follow if they wish to transfer or dispose of their shares. In addition, detailed matters such as under what conditions and how partners and family members may benefit from company resources should be carefully defined. When such fine details are properly considered, a family constitution can become a functional safeguard that extends the lifespan of the company.

It is important to remember that approximately 70% of SMEs—which form the backbone of Turkey’s economy and account for a large portion of the government’s tax revenue—close down before they can even be passed on to the next generation. One of the main reasons for this situation is that, for the founding generation—who are waiting for the right time to hand over the reins—there just never seems to be a quiet moment in their professional lives when they can step back! It must be clearly stated that in a rapidly advancing world like this, there will never be a truly calm or quiet moment—neither in today’s business environment nor in the future of work. Therefore, founding generations should not wait for any “perfect moment” to take action. Instead, for the sake of their children, grandchildren, their family’s future, and the continuity of their companies, they must be ready at all times to transfer duties and responsibilities, remaining in constant motion and prepared to hand over authority even as everything continues to move forward rapidly. In family businesses, institutionalization essentially rests on the ability to be ready for delegation of authority at any time. To develop this capability, all members of the second generation, without any distinction between female and male, should be provided with continuous training programs supported by professional coaching and consultancy. Where necessary, they should be encouraged to gain experience outside the family business, and within the company itself they should be given the opportunity to work in different departments. In this way, they can gain hands-on experience and develop a comprehensive understanding of the business as a whole. Trade history is full of examples of companies that shrank, lost their scale, or even collapsed and shut down as a result of the founder passing away before being able to transfer control. The fact that there are multiple siblings or relatives in the founding generation, or that the company has high production capacity and turnover, does not really change this reality. That is life… Fate weaves its own course; while traveling together on a business trip, an unforeseen incident affecting everyone may occur. Customers who contribute the most to sales revenue may suddenly be lost for various reasons, or a natural disaster may strike, forcing production to halt. Considering all kinds of risks and possibilities, the career planning of second and third-generation family members should be structured in advance, and clear authority and assignment schemes that can be implemented in times of crisis should be prepared and kept ready at all times.

Retirement planning is, for many people, something that is not given much importance, often seen as a period in which one must completely withdraw from everything. However, any thoughtful person who does not want to leave things unresolved should prepare in advance for an active and meaningful retirement life. While they still have the ability to intervene in problems and the strength to provide support, they should know how to transfer their responsibilities and make decisions in that direction. Especially in Türkiye, I know that many people who are unsuccessful in time management and who think they are fully engaged in business life by filling their schedules with unproductive meetings and unnecessary appointments tend to be indecisive in this regard. But they should be certain of one thing: the greatest thief of time is indecision!