The changing needs and challenges in the different lifecycle stages of a family business

1) To function in enhancing ways as a business.

2) To function in enhancing ways as individuals, both within the family and within the business.

3) To function in enhancing ways as a family, both within the family’s private world and within the family’s public world.

The interviewees of this study also felt that although these tasks might not always be realizable at the same time, in the long run they all had to be reached.

6.4.3 The changing needs and challenges in the different lifecycle stages of a family business

One of the interviewed retailers described his personal development as an entrepreneur and talked about how his values and goals had changed during his career, as seen in the following citation. His career represents a typical example of a K-retailer moving from a smaller to a bigger store, but this retailer had been more successful than many others. He was now approaching the passing-the-baton stage in the business, and was making an

“assessment” of his career and his life. According to him, a beginning entrepreneur first has certain material needs and desires that make him/her to start his/her own business.

Once the business has been established, the entrepreneur wants to concentrate on developing it. All the retailers in this study agreed that the primary goal of the business in the start-up stage was survival. After business grew, resources would continue to be invested into the firm to develop it further. If everything went well and the business started to prosper, the entrepreneur would have time to think about life’s other dimensions. Then perhaps came the realization that he/she was no longer needed everywhere the same way as in the start-up stage. According to the cited entrepreneur, this could lead to a sense of frustration.

H8 At some stage your perception of money changes ... I felt I wasn’t progressing, I wasn’t needed. It’s a terrible thing for a retailer to feel that he’s not needed – that this firm can run without me. I’ve aspired for it and spent years building it, and all of a sudden people start to act in a way that makes you frustrated, as if they ousted you. You really work at it, and then comes the moment when you start to feel useless... And then your set of values shifts toward other roles ... For me towards self-improvement and personal development. H8

At this point an entrepreneur usually looks for new challenges and begins to renew his/her business or starts a new and bigger business somewhere else. In a K-retailer’s career, it is common that a retailer who has successfully developed the business gets to move on to a bigger store as a kind of “reward” for his/her efforts.

H8 When I moved to this store, the challenge was: would I be able to make it or not. Could I manage a big unit like this ... I gave it all I had to the very last drop ...

the pressure was enormous, but I had an urge to prove that I could make it as a family entrepreneur. I wasn’t thinking about money at that stage either, only about

whether I’d be able to manage ... I had one hell of a debate with myself. But I took it as a challenge. A challenge to show those around me that it’s possible to make it as a family entrepreneur in Finland... H8

Bartlett (1988, 7), who has described entrepreneurs sometimes in rather ironical or even derogatory terms, suggests that the singleness of purpose is characteristic of entrepreneurs. He argues that after having determined an objective and set their foot on the first step, entrepreneurs commit themselves and all who follow them. Such singleness of purpose, according to him, can be known as ruthlessness, perseverance, determination, one-track-mindedness, or even limited capacity, depending on the view taken by the observer. But as far as entrepreneurs are concerned, it is the only approach that is effective. In their early days, they will endeavour to move forward and upward regardless of effort and time, until their progress is recognized. At that point they will look for a better kit in the form of management and advisers, and whilst the general direction will continue to be upwards, they will be prepared to take time out to reconnoitre and evaluate alternative paths which appear to converge on their ultimate target. Bartlett continues that the experience of an entrepreneur will have reconfirmed his/her original intent but he/she will have accepted a need from time to time to amend the used tactics to take advantage of past errors.

The retailer cited above (H8) took the challenge and created a big, successful business. In spite of many misfortunes, the business began to grow steadily right from the start. The retailer was satisfied with the business but he was after something more: he wanted to be

“the best”. He wanted to prove himself as a retailer. Now it was no longer a question of money but of his career. But then, after a while, he again started to contemplate other values in life than money and material goals.

H8 That really pushed me forward and inspired me to start developing my store to become the biggest store in Finland in terms of sales, and to feel what it’s like to stay at the top for a couple of years. But it’s funny how your values transform. At that time I just had to be best. After a few years at the top I began to calculate that that, too, costs money ... it costs a hell of a lot of money. And then you start to think about other values. H8

Similarly, Beckérus and Roos (1985, 152-156) suggest that entrepreneurs do not feel that their only motive for being in the business is money or their own economic success.

Rather, they also have an excessive feeling of responsibility for all their employees. They feel not only the risk of losing their business but also of losing the jobs of their co-workers. Family firms generally have a longer-term outlook to their business than other companies, which may also lead to a greater sense of social responsibility. This means that family owner-managers may have a different outlook to their interest groups such as their employees. (Kets de Vries 1992, 7.) Or, in the words of the interviewee cited above:

H8 ... That’s maybe the difference between family entrepreneurship and other kind of entrepreneurship. You learn to think about your employees ... This is basically about values. If you are an entrepreneur, you have responsibility ... We’re accountable to the next generation, and I don’t mean our own children, but so that this system continues into the future. And entrepreneurship – namely, private entrepreneurship and family entrepreneurship – can indeed work here in Finland, provided that the conditions are in place ... H8

Bartlett (1988, 6) has noted that as the entrepreneur’s empire grows, he/she will become more and more involved in matters of finance and be impressed by those who make money out of money. It is not uncommon to find successful businessmen eagerly accepting appointments to local boards of joint-stock banks and the more successful acquiring control of, or influence in, merchant banks. Timonen (2000, 72, 107) has focused on the institutional tendencies of farm entrepreneurs – that is, their tendency or ability to take part in different societal activities in their own field. She found that the older or better-educated the farmers were, the more likely they were to be elected to positions of trust or to take part in organizational activities.

This study also indicated that family entrepreneurs began to focus more attention on their common interests only after their own individual business had become stabilized and successful. Before that, the family firm took up all their time. Many of the more established retailers in this study were working in the chain organization as K-retailers’

representatives who negotiated the agreements with the suppliers or industry, but mostly they had no time for other societal or professional activities except to promote their own business.

H8 ... At some point you start to think that now you’ve got your own firm going, now you have to grow to take the next step. Which means you learn to think more calmly and look into the future outside the firm... You also have to grow with regard to your values, so that you can see society and the economy and your chances for success also in the longer term... I don’t think it’s about power, I don’t enjoy power. I think it’s more about responsibility ... you can be good at your own business but then you think you can’t have any influence in society. Well, you certainly can’t influence things if you sit alone grumbling in your corner ... H8

Table 16 presents the single-generation lifecycle model of K-retailers and summarizes the goals and decisions of a household-enterprise complex in its various lifecycle stages, both from the viewpoint of the family and of the business. It is often difficult to decide which comes first, so it is useful to include both units in the same table. This is an important aspect to consider also in developing cooperation between retailers and the chain system. The business family and the family business are bound very closely together – a fact that is apparent also in the data of this study.

When examining the values, goals, and targets of an entrepreneurial family in the light of lifecycle thinking, it becomes clear that the major goals of the family are formed in the young-business-family stage. The family has to decide where and how to live and what kind of business to create. The division of labour has a crucial role in view of efficient time use in the family and in the firm, and may sometimes be a source of conflict between the spouses. Also, since the business is in the start-up stage, it demands a great deal of both time and money from the owners.

According to Bartlett (1988, 6), entrepreneurs in the early days of their career will be concerned first with survival and then with establishing a reasonable power base. In this second phase, they may well crystallize their general ambitions into specific objectives.

Still, they will seldom, if ever, communicate them directly to others, although from time to time even the most casual observer will be able to distinguish their intent.

Entrepreneurs have different goals in the various stages of entrepreneurship. In small owner-managed businesses these depend on the entrepreneur’s own personal goals, which also reflect his/her values (Timonen 2000, 46).

In the entering-the-business stage the major conflicts of family entrepreneurship have been solved, and the division of labour can be revised if the wife now has more time for the business as the children are growing. The entrepreneur’s children may also help in the business in some tasks. The organization of the firm is growing larger and more complex, and the owners have to pay increasing attention to the management of the business. In this stage, a K-retailer often moves to another store, which usually means returning back to the start-up stage on the business axis.

Next, in the working-together stage, the retailer family is usually planning the future of the children and also making some plans for the retirement of the parents. The children are finishing school, and are often working in the firm training for the business, or are pursuing a different profession and helping out when they can. The family and the business both need cash and time for different purposes. The family seeks security and the business starts to require renewals.

The passing-the-baton stage is a time that may give occasion to various conflicts. It is very important for the continuity of the business that the family has a mutual dream shared by the family members. One or more of the children are continuing the business, while at the same time they are starting their own families and making decisions about the desired standard of living and way of life. The parents seek new interests (hobbies, social or organizational duties) and the next generation seeks growth and change. This stage is critical, and many family firms are not continued into the next generation.

Table 16: Single-generation lifecycle model of K-retailers: Family-business lifecycle stages and main interest areas of K-retailer families and firms.

Goals and decisions in the family Goals and decisions in the firm Young-business-family stage:

Founding years Shaping of major goals;

Housing decisions;

Division of labour in the family and the firm; Family’s financial needs = basic needs;

Family goal = success of the business.

Training stage: Training to be a retailer Start-up stage:

Rapid growth of business, demanding time and money;

Small but dynamic organization;

Owner committed to business success;

Family and business aligned via cash flow.

Entering-the-business stage:

Children helping in the business for pocket money;

Family goals = raising and educating the children.

Formalization stage:

Larger and more complex organization;

Owner desires control and stability;

Family needs increasing;

Cash and time needed for different purposes by family and firm (parenting vs. business growth);

Possibility to move to a bigger store.

Working-together stage:

Assessment years Standard of living;

Planning of retirement;

Children helping or training in the business;

Renewal of store / moving to bigger store = New start-up stage

Owner’s goals = new interests or “semi-retirement”;

Succession or sale of the firm or dissolution of the firm;

Different agendas and risk outlook of older and younger generation;

Owner’s goals = funds for retirement;

Younger generation’s goals = development and growth of business.

The single-generation life-cycle model in Table 16 illustrates the complexity of a family business, but in real life the situations faced by K-retailers during the various lifecycle stages are usually even more complicated. Moreover, a business family may, in fact, be in several stages at the same time. The children in the family may be of widely different

ages, there may be health problems, money may suddenly be needed for more investments, etc. Similarly, the family business may also be in several stages at once. A business may be over five years old, but when the retailer moves to another store the business usually returns to a start-up stage. In this study there was only one case in which the situation was so bad that the retailer was reconsidering his his decision to become an entrepreneur. But this does not mean that the other retailers had not experienced hard times. In each case, the competitive situation was quite tough and all of the retailers had had to consider the possibility of failure. However, in case of a failure, the household and the enterprise may be even more tied together. Usually the retailer loses everything when a failure occurs. In a bankruptcy, the entrepreneur gets all his/her strength from the family, and every available resource is necessary and valuable (Römer-Paakkanen 1994).