QUALITY MANAGEMENT AS A FIRST-AID KIT FOR FAMILY-RUN BUSINESSES
Family-run businesses constitute a large part of the German economy and are international market leaders in many areas – not least because of the quality of their products. But what happens to such a company if the management suddenly leaves? A so-called “first-aid kit” ensures that company succession is properly organized, even in exceptional circumstances – and that the company remains capable of acting. Our guest author, Dr. Sabrina Schell of the Institute for Organization and Human Resources at the University of Bern, explains what it is important to have in a first-aid kit and what role a quality management system plays in all of this.
According to current data from the Institut für Mittelstandsforschung [Institute for SME Research] in Bonn, the share of owner and family-run companies in Germany currently stands at 93.6 %. That means that family-run businesses account for a large part of the German corporate landscape. Small and medium-sized German businesses are also renowned well beyond the German borders, not least because of their quality awareness.
SUCCESSION AS A CHALLENGE
However, in recent years, the share of family-run businesses has been on the decline. This may be due to a number of different reasons. On the one hand, family-run businesses are faced with the challenge of finding suitable successors. These not only need to be willing but also capable of taking over a family-run business. On the other hand, however , such family-run businesses must be in a state that allows them to actually be “handed over”. This is another area that gives rise to numerous challenges. Quite often, businesses – in particular, micro businesses, are not in a state to be handed over at all as the performance indicators show that the cost of the succession would be higher than the benefits reaped by the individuals taking on the business. However, this is also coupled with another challenge – one which is really quite considerable in itself: The handling of the strategic and operational planning of the company succession.
HOW LONG DO COMPANY SUCCESSIONS TAKE?
A company succession can take anything up to 12 years. A study conducted by the St. Gallen Center for Family Business shows that organizing a company succession – particularly amongst internal family members – can take a long time. One of the reasons for this may be that the needs and expectations of individual family members have to be clarified, for example. Irrespective of the fact that a lot can happen in 12 years, one always has to allow for an unplanned company succession, for example, in the case of a death or illness. As a rule of thumb, one should plan for the next succession as soon as one succession has been completed.
WHAT IS A FIRST-AID KIT FOR COMPANIES EXACTLY?
If studies show that despite preferring an internal succession, a family-run business is finding it difficult to plan – which might also be a question of resources – and is also uncertain whether and when the successors might be able to take on the succession, or whether they would even want to, this emphasizes the fact that such a family-run business would be well advised to have a so-called “first-aid kit” in place.
A first-aid kit is divided into different sections . On the one hand, all the major contracts should be coordinated according to a unified concept. On the other , these should be stored and accessible at a central location known to the potential successors.
WHAT DOCUMENTS IS IT ESSENTIAL TO HAVE IN A FIRST-AID KIT?
- Articles of association,
- Commercial register extracts,
- Loan and rental agreements,
- Powers of attorney,
The provisions in the articles of association should be consistent with the provisions in one’s last will and testament and, where applicable, marriage contracts – or vice versa. These documents are obvious choices and often available and are transparent with respect to the third parties with which they were drawn up and where they are stored. However, we are faced with quite a different situation, for example, if we are looking at passwords for the PC, the safe or the bank accounts. In small companies, in particular, not even having this simple information to hand could lead to the successor or interim manager not being capable of acting which could push the company into difficulties.
Another essential component needed in a first-aid kit is a continuous backup of core information on current business operations, such as the status of important projects, an overview of both the company’s current and past project partners, and a business assessment that is as up-to-date as possible. This up-to-date and documented information makes it possible to step in at a moment’s notice and to be able to act accordingly.
WHAT ADVANTAGES DOES A QUALITY MANAGEMENT SYSTEM OFFER DURING THE SUCCESSION PLANNING PROCESS?
Quality management systems and ISO certification processes and management systems already take into account much of this important information. For example, consideration is given to this topic in section 7.1.6 Organizational Knowledge of the ISO 9001 standard which states that knowledge must be determined and maintained in order to guarantee the operation of the company’s processes. This section of the standard takes both internal and external sources into account. An electronic quality management system can help to collect and structure this knowledge and information, thus making it accordingly available. Providing important employees (possibly those responsible for quality management) with access to this information ensures that this knowledge can be accessed in an emergency, even if no successor is available at such short notice. For example, the contracts themselves do not actually have to be deposited anywhere specific, but references should be available as to where they can be found.
As an unplanned company succession, in particular, can push a family-run business into difficulties, it makes sense to operate a quality management system – on the one hand, to generally maintain good quality levels throughout the company, and on the other, to provide for an emergency situation. However, even a QM system does not totally release you from the task of installing a systematic operational and strategic plan to cope with a company succession which will allow your family-run business to be led sustainably into the future.
Dr. Sabrina Schell
Dr. Sabrina Schell ist Wissenschaftlerin an der Universität Bern, am Institut für Organisation und Personal. Die studierte Diplom Wirtschaftsjuristin promovierte an der Universität Siegen in Betriebswirtschaftslehre zu Unternehmensnachfolge in Familienunternehmen, unter anderem mit dem Fokus auf Informationsasymmetrien und ihre Auswirkungen.