Different Governance, Similar Legacy

Exploring Sustainable European Family Business Models

Research on listed companies in major European countries shows that, in the last decade, family owned business performed better than professionally run business. These family companies have thrived for centuries because they have solved both “people problems” and “money problems”.

On the people side, these businesses set sustainable systems to develop talent and successors in and outside of the family. On the money side, they established sustainable mechanisms to manage capital. Family members abide by their governance, management and decision-making rules, and respect the shared values that have been passed on for generations. Thus, the tradition continues.

The Mulliez family and the Voith family both run centuries-old businesses. By examining these two European companies, we can uncover different ideas on the role of family members in managing the family business and how these ideas lead to different management architectures.

The Mulliez Family: DIY and Ownership

Benoit Leclercq of the Mulliez Family holds the position of Managing Director of Crehol Investments Consulting (Shanghai) Co., Ltd. He believes that a private company should stay “private” – family members should nurture a special bond to the family business. That is what the Mulliez family does: The company maximizes family members’ direct involvement in its business so that every member makes a contribution.

A special team in the Mulliez family office concentrates on maintaining and strengthening the family’s bond to the company. “Family members need to have an attachment to the family business. This makes a company stable.” Currently, 200 of the family’s 600 members hold management or governance positions in the company. Members develop these ties beginning in childhood. When they are teenagers, they get to know each other better through family gatherings, and later they undergo training to develop entrepreneurship skills.

For junior family members with potential who want to join the company, this offers development opportunities and chances for promotion. But positions are only given to those with adequate skill and experience. “We prefer business presidents from our family, but sometimes it’s not practical,” Leclerq says.

Also, the Mulliez family strives to pass its ethical principles on to the next generation. “We really value caring for others. We focus on developing creativity from a young age, but also on instilling the family values that have been passed down for generations.”

The Voith Family: Because I Care, I Can Let Go

Voith family member and shareholder Martin Schily started by saying, “I don’t represent the Voith Group, but I am a member of it.” His words revealed a family governance principle of the Group: During official occasions, a member of the family speaks for himself only. The 140 year-old German family enterprise minimizes appointing family members to senior manager or executive positions.

Voith was founded in 1867. As the third generation successors of the business were all women, contemporary society required introducing a non-family management setup. As a result, the daughters all became shareholders. This rule of having “no senior managers or executives from the family” has been in place ever since. In addition, Voith set up a Board of Supervisors where only a few family members hold seats. The Board elects talent for the company, ensuring flexibility and stable succession for the business.

Martin Schily believes that the success of family firms can be partially attributed to family members’ care for their business. But sometimes too much care can cause trouble for the business. Even if you care deeply for the business, rigidly adhering to your own views and decisions can hamper business development. In this case, it’s better to trust the business to professional managers.

Shareholders, freed from management responsibilities, have more time for their own pursuits. Voith encourages each member to develop his or her own way of life and to develop a balance between work and life.