It is not a given fact that a family-owned company will find a motivated successor. Finnish Family Firms Association’s Executive Director Auli Hänninen and Aho Group’s Board Chairwoman Miia Porkkala discuss the work that generational change requires from owners.
Family ownership is the most common form of ownership in small companies, while one in five large Finnish corporations is family-owned. Family-owned companies employ 37% of personnel in the private sector.
Generally speaking, family-owned companies try to continue across generations – but does that succeed? Auli Hänninen estimates that currently there are thousands of companies facing generational change in Finland in the very near future.
“Getting help for the technical implementation is easy, but most of the work is in building the mental resources and readiness needed for the tasks ahead. It is much more than just the company’s founder wanting to step aside and quit decision-making. A motivated recipient who is interested in the business is also needed,” explains Hänninen.
“Generational change is a very long process indeed. In Aho Group, we had the first generational change on the drawing board for almost 10 years, and it was finally implemented in 1999. Now, we five siblings are all co-owners. We started preparing for the next generational change almost immediately after the first one was completed,” says Miia Porkkala.
Each generation decides on its own solutions
When a generation changes in a family company, the successors do not instantaneously become rich in the sense that they would have lots of money. Ownership of a family company is contingent on keeping the business running. It is ownership, not money, that is transferred to successors, as well as the work and responsibility that comes with it.
“The task of a family company’s owner is to develop and renew the company’s business so that it retains its vitality. Each generation decides on its own solutions, takes its own risks and shapes the company in their own image. Ownership of a family company is not about nurturing or safeguarding an inheritance; it’s about dynamically developing the family’s companies,” says Miia Porkkala.
“What is most important in generational change is that the joy and spark of entrepreneurship are carried forward from one generation to the next,” she adds.
Exposure to business life is best started early
One task of the owners is to expose the family’s children and younger members to the family’s business activities in a way that generates a positive bond and kindles interest in the companies. The companies, their personnel and customers are important to the family. Porkkala believes that a career in a family-owned company should not be taken for granted, or even be a goal. The younger generation must make their own decisions based on their own circumstances.
“Ownership encompasses many different roles; the operative role is just one of them. Boards of directors and advisory boards need good, active members. An owner being an observer on the board can also be a good choice sometimes. Roles often change with age, training, experience and interest. Ownership of a family company must be agreeable, and it must also be possible to detach from it when that is what’s desired,” she says.
Building the readiness and resources is largely a question of communication and interaction, Hänninen and Porkkala both agree. Companies must bring potential successors close to them in order to kindle their interest.
“Millennials are interested in tasks that have a meaningful dimension. If we can convince new generations that they can pursue meaningful activities through our companies, we’re a step closer to a successful change of generation,” Porkkala says.
At meetings of the Finnish Family Firms Association’s Next network, young family members of the successor generation can meet and learn from each other. There is also a network dedicated to young people who have already started working in the family business. Hänninen reports that these young people have given good feedback.
Summer jobs, training and listening
Successors do not become mature enough to accept the responsibilities of ownership overnight. Hänninen and Porkkala think that a natural way of becoming familiar with the family’s companies is through summer jobs, internships, and writing university theses on a business-related subject.
“A family-owned company can also have a training programme for the family’s young adults that systematically reviews issues associated with ownership and entrepreneurship. One way to gain first-hand experience of the family’s business activities is to sit as an observer on the board of directors,” points out Hänninen.
Aho Group’s second and third generations convene 3–4 times a year to address a topical theme. The head of Ruka’s and Pyhä’s responsibility programme will be speaking at the next meeting. Every year the family meet for information events to keep in touch with what is going on in the companies.
“Even 5 year-olds join in. If the subject is too difficult, the kids get their tablets out and play by themselves. We want the third generation to understand that there’s nothing to hide about ownership, and nothing to be ashamed of, but instead it’s a normal part of our everyday lives. It’s also good to make them aware of the good governance practices developed by the family: ownership must not be misused. It’s best, also, to be aware that the actions of a family of owners are scrutinised more thoroughly than others,” lists Porkkala.
Most important is the feeling of belonging together
The best indicator of a successful change of generation is, however, the feeling of togetherness enjoyed by a family of owners. That is developed through regular meetings and making sure that each voice is heard. Competent owners make sure this happens.
“What’s most important is to bring everyone together, breathe the same air, and to learn through cooperation, discussion and by challenging each other in a positive way. It’s essential that everybody feels they belong to the same crowd and that each person’s contribution is valued. In Aho Group, we’ve seen at first hand how motivating it is for young people to have their suggestions given respectful consideration. It’s well worth asking young people’s opinion,” asserts Porkkala.
The owners of Aho Group all agree that the company’s success derives from its personnel, customers and family. Good care must be taken of all of them.
“Success doesn’t come by accident. Luck is very important; it’s always needed. But it can be given a helping hand by careful consideration and target-oriented work,” says Miia Porkkala.
Photos: Junnu Lusa
Who she is: CEO of Family Business Network Finland since 2017.
Education: LLM and eMBA from University of Turku, Finland.
Earlier work experience: Altogether 14 years as service director and CEO of the General Unemployment Fund YTK, or “the dole” in British slang.
Who she is: Chairman of Aho Group’s Board of Directors. Board member at Aava Terveyspalvelut Ltd, University of Lapland and Business Finland. Also Chairwoman of Nordea Rahasto Ltd.
Education: MSc (Econ) from Helsinki School of Economics and Business Administration, MBA from EDHEC Business School.
Earlier work experience: Started her career as a ski instructor at Ruka. Worked in various business development positions, and was CEO of Rukakeskus Ltd for 14 years.
Finnish Family Firms Association
What it is: An interaction network, lobbying organisation and professional services & training body for Finnish family-owned companies and owners with a face.
Members: Altogether 456 corporate members employing a total of 174,000 people. Aggregate net sales amount to EUR 35.4 billion.
Operations: The Association offers its members training, professional and specialist events, networking opportunities and consulting services. It also lobbies on behalf of Finnish family entrepreneurs.
Mission: We build sustainable Finnish ownership.
What it is: Aho Group is a Finnish family business active in the tourism and healthcare sectors. Subsidiaries include Ruka and Pyhä skiing centers in Northern Finland as well as Medical Center Aava, Medical Center Pikkujätti, Uudenmaan Seniorikodit and Docrates Cancer Clinic, which attend to their patients’ health at different stages of life. The Group employs over 1,000 dedicated professionals. Of these, some 250 work in the tourism business.
Birth and history: Juhani Aho, a physician, together with some friends, co-founded Helsinki Center Aava in 1964, which later became Medical Center Aava. In 1972, Aho bought Rukatunturi Ltd, which he developed into a diversified skiing and tourism centre. In 1988, the corporation acquired Pyhätunturi’s skiing centre operations and Hotel Kultakero in Pelkosenniemi, Lapland.
Ownership: Eila and Jussi Aho’s five children. Kari Jussi Aho is Chairman of Rukakeskus Ltd’s board of directors, Miia Porkkala is Chairwoman of Aho Group’s board of directors, Annakaija Lappalainen is Medical Doctor in Charge at Women’s Aava, Antti Aho is CEO of Aava Terveyspalvelut Ltd, and Ville Aho is CEO of Rukakeskus Ltd.
Net sales: The consolidated net sales of the companies amount to some EUR 125 million, of which about EUR 32 million is generated by tourism and EUR 93 million by healthcare operations.