Keeping it in the Family | Business| Economy and finance news from a German perspective | DW | 13.04.2004
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Keeping it in the Family

Family-run businesses in Germany face a unique problem. When the person at the top abdicates, how do you keep the business in the family? Help is at hand for those companies looking to pass on the reins of power.


Will he want to take over his daddy's gardening business?

In an economy that seems to be in a perennial state of recession, Germany can look proudly on its middle-sized enterprises, one of the most stable areas in German industry. However, this cornerstone of the German economy faces a unique problem which is threatening the future of the mainly family-owned businesses.

Middle-sized enterprises in Germany employ more than 65 percent of the country's entire workforce, training nearly 80 percent of Germany's apprentices and generating about 45 percent of the national turnover.

But while the current state of these enterprises looks rosy in comparison to others suffering the bite of recession, many companies which have been controlled by a dominant family for generations face the prospect of closure or sale due to the problems arising from succession.

It has been estimated that around 400,000 enterprises, employing about five million people in total, will face an uncertain time in the next three years as matriarchs and patriarchs vacate the controlling chair in the family-based company hierarchy.

Relatives rarely show an interest in taking over

Research shows that nearly 50 percent of family-owned enterprises disappear within five years after the founder steps down, relinquishing the reins to descendants with no desire to run the family business or knowledge on how to do so. Five percent of these companies do not even survive past the third generation.

However, help is at hand. The Institute of Family Enterprise at the private university at Witten/Herdecke offers students the opportunity to learn how to run a company with a long family tradition and provides technical assistance in the solution of company problems. The course also addresses the legal requirements laid out in succession regulation.

Letting go is hard to do

Often problems arise from the situation where a controlling family member refuses to completely relinquish the reins of the company. The successor then has an added problem of dealing with interpersonal problems as well as that of running a business that is more often than not a new experience. In these cases, the university also offers advice on how to handle the psychological side of the family business.

"Before this institute was founded, there was a large number of conversations with family enterprises and if there was one point on which we all agreed, then it was this: we need to address psychological competence at this institute," Hermann van Bömmel from the University of Witten/Herdecke told DW-WORLD.

Trainee course educates at grass roots

While the university deals with the family heads of the future, a technical college in Bielefeld is addressing the grass roots of every business -- the training of employees. The advanced technical college trains students specifically for middle-sized operations over the duration of the three year course.

The course, according to one its professors, prepares the trainee for the harsh realities of working in a medium-sized family business. "Our promise," according to Wolfgang Krüger, "is that we prepare them for all professional eventualities. We apply special value to the strengthening of initiative in the pupils."

Preparing the family leaders of the future

About one third of all the students taking the course's business administration module come from family enterprises. These students, according to Krüger, will probably return to work in the family business. "They must be prepared for managerial responsibility in the future," he said. While other sectors of industry contemplate ways of saving themselves, family businesses in Germany have already begun to address the problems and possible solutions which will become more important in the future.

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