Governance is crucial for family-owned businesses in rapidly changing environments : Extracts from Sorin Popa’s Interview

February 29, 2024 Share this article:

Corporate governance. That’s the key to succession planning in family-owned businesses in Romania, according to Sorin Popa, Managing Partner Accord Group Resurse Umane / AltoPartners Romania.

Popa, who has been working in executive search in the country for decades, says he first started working with family-owned businesses about 18 years ago. He recruited a chief financial officer for a large company - who is still there. “I guess I got it right that time,” he says.

The picture Popa paints is that of a rapidly shifting economic and corporate environment. In that landscape, family-owned businesses in the country are only now moving from first-generation leadership to second-generation leadership. That’s because private ownership of business entities only became possible after the 1989 revolution.

The relative youth of the sector does not mean it is small - Popa says there are several very large companies which are family-owned. As is typical of family-owned businesses, they are characterised by agility. “They are very fast. They’re adaptable. There are no boards of directors to approve a decision, the boss just does it,” he says.

That can also cause some problems. Popa says he’s seen some situations where there seems to be a lack of distinction between the business’s finances and the family’s finances. And the focus on adaptability can lead to a lack of strategic thinking.

In the transition from first to second generation, challenges can often be traced back to the founder of the company. Popa’s observations:

  • The founders know everything, they know how to run their companies.

  • They work on personal chemistry

  • They feel as if they are bringing someone into their home (if they hire from outside)

  • You have to let founders think something was their own idea (ego is a big problem)

  • People take a lot of shortcuts

In those circumstances, Popa says the most helpful thing a company can do is to focus on governance. In his work with family-owned businesses in other European markets, he’s seen companies bring in professionals to their boards as non-executive directors. “It is time we start to look at this in Romania - and indeed, in the last five to 10 years, I’ve started to see family-owned businesses adding people from different backgrounds, from different industries, to pick their brains in order to succeed.”

Once a company has established a board of directors with some outside expertise, he advised them to look at the talent within their own ranks, even if that person is perhaps not a member of the family. “It is hard to graft someone in from the outside,” he says, recommending market mapping. He also advises looking for people who have worked for a FOB before, along with corporate experience.

READ AltoPartners White Paper on succession planning in family-owned businesses