Management by generation of ownership.
The breakdown by generation managing the family business set out in Table 11.1, demonstrates that about 69% of owners identify themselves as first generation family owners, 23% as second, and 8% as third to fifth generation.
These figures indicate that there are 3 times as many first generation family businesses as there are second generation, and that there are 3 times as many second generation as there are third to fifth generation family businesses.These proportions reveal an interesting shift. In 2006, we find that there is a significantly smaller proportion of multigenerational entities, but a greater percentage of first generation firms, when compared with our 2003 study.
The management team
As might be expected, about 39% of family firms have management teams comprising of 100% family membership (median 66%). A detailed examination of this characteristic reveals that only 0.4% of family businesses do NOT have family members who are part of the management team.
However, 45% of family firms have management teams comprising up to 50% non-family members. Interestingly, 70% of first generation family business owners indicate that family membership is NOT important when considering senior appointments compared with 57% for second generation, and 42% for third-to-fifth generations.
Involvement of family members in the day-to-day running of the business
Spouses are involved in the day-to-day running of 53.1% of family firms, as well as sons 29.8%, daughters 5%, and other family members 12.4% (Table 11.2). More daughters (and other family members) are involved in later generation businesses and more spouses in earlier generation businesses.
Remuneration rates for family members working in the business
Almost 64% of owners indicate that family members are paid market rates, with about 26% reporting family are paid above market rates, and only 10.4% reporting that family members are paid below market rates.
Outside management experience
One of the major issues facing family businesses is how to bring members of successive generations into the enterprise. The family business literature invariably recommends that potential successors acquire outside work experience before joining the firm.
Successors who have had an opportunity to prove themselves outside the family business before joining have a greater chance of feeling that they have received adequate preparation for their role.
Interestingly, 54.7% of family business owners do NOT make outside experience a prerequisite for family members to join the business (43% for first, 46% for second, and 58% for third-to-fifth generation family businesses).
These results are consistent with findings in our 2000 Succession Matters: The Australian Family Business Survey, demonstrating that owners do not appear to attach much importance to outside management experience, ranking it 24th out of a list of 30 critically important successor characteristics.
Family business nepotism
Nepotism may be frowned upon by the family business literature, but it does not appear to bother a quarter of family business respondents, who indicate that family members are found a position in the business. However, the other three quarters point out that family members are employed only if their skills and experience fit a particular opening in the business.
Leadership profile of the non-owner Chief Executive Officer
The average age is 51 years for both family and non-family CEOs, with an average tenure of 17 years for non-owning family business CEOs (versus 10 years for non-family firms).
Almost 95% of non-owning CEOs are male (96.2%). For non-owning CEOs, 29.5% (42.6%) hold tertiary qualifications, and 15.4% (16.7%) have postgraduate qualifications.