Four out of five family-owned Irish businesses report conflict within the firm, but few have a conflict resolution mechanism or agreed set of rules to allow the members to deal with it.
WC’s 2021 Irish Family Business Survey found that only a minority of family businesses had taken basic steps to safeguard intergenerational wealth, such as writing a will (38pc) or drafting a detailed succession plan (23pc) for passing on the business.
The firm said Irish family businesses are leaving themselves exposed to tax losses, expensive legal disputes and strategic confusion due to poor inheritance and succession planning.
“It is vitally important that businesses take a lead on ensuring they have formal processes in place so they can ensure stability and continuity in the long run,” said Mairead Harbron, a director at PwC Ireland Entrepreneurial & Private Business Practice. “Family harmony should never be taken for granted and having proper governance structures is important.”
Those gaps in governance reveal a material vulnerability, given that 80pc of Irish family businesses report having family conflict within the business, higher than the global average of 77pc.
Fewer than one in five have a conflict resolution mechanism (18pc) or a family constitution (16pc), meaning internal disputes have to be resolved on an ad hoc basis.
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Tom Roche, the founder and chair of energy and infrastructure firm NTR and a driving force behind the Family Business Network and DCU’s Centre for Family Business, told the Irish Independent last month that the sensitivities around family relationships made strong governance essential in family businesses. This was as much to maintain harmony as to attract capital investment.
“The broad principle has to be governance,” he said. “And the family has to have governance in three areas: the family itself, the executive branch or the family office, and the business itself. This will be demanded by outside investors.”
However, things are moving in the right direction for Irish family businesses – ironically due to the pandemic.
The disruption caused by Covid-19 has opened up space for discussion and concentrated the minds of Irish family business owners.
Even though just 23pc of Irish family business leaders have a robust, documented and communicated succession plan in place, this is up from 18pc two years ago.
“The pandemic has triggered both an economic and health crisis and therefore minds have been focused on the downside of not having an adequate succession plan in place,” said Ms Harbron.
“In addition, with lock-down restrictions, people have found themselves at home with more time to think about strategic objectives like succession planning.
The PWC survey was conducted via 2,801 interviews across 155 countries, with 79 Irish family businesses taking part, nearly 40pc with a turnover of €100m or more.
A major study last year by Dublin City University said there were 160,700 family businesses in Ireland.