Beyond the Iron Curtain family business in Austria

Marc Smith is deputy editor of Families in Business.

Located at the geographical heart of Europe, Austria is a good gauge of the shifting sands that make up the modern continent. On the one hand its borders with Italy and Germany reflect its historical and cultural clout, while on the other its borders with the emerging economies of Hungary, Slovakia and Slovenia hint at a new, growing economy.

Family business in Austria has a history that dates back centuries – one hotel-owning family is in its 22nd generation – but is today finding its feet among the very modern dilemmas of conflict resolution, family foundations and international networking.

In common with his adopted country, Bernward Brenninkmeyer has his feet in both camps. With a family that has roots in retailing that date back to the 17th century – the Brenninkmeyers founded and own the C&A empire – he is today the founder of an independent multi-generational family office that is helping to resolve any conflicts that may arise between family members spread across many countries and time zones, and working to establish a family, enterprise and wealth strategy, jointly with the family, in an holistic and methodical way.

"Since I first arrived in Austria in 1988 I have noticed a lot of change. It used to be a bit parochial, but today it is a more open, global country," says Brenninkmeyer. He puts the change down to two distinct events: the fall of the Iron Curtain – the boundary that symbolically, ideologically and physically divided Europe into two separate areas from roughly 1945 to 1991 – and Austria's entry into the EU in 1994.

"Vienna looks different today and it is no more evident than in the retail sector where my family has so much experience," continues Brenninkmeyer. "There were only one or two shopping centres in the whole of Austria in 1988. Now they can be found in every city in the country."

The fall of the Iron Curtain created a lot of opportunities for family business. Markets have opened up and historical relationships with neighbouring countries have been renewed. "A lot of Austrian family businesses bought [foreign] businesses and helped to develop other businesses that had suffered with being shut out," says Brenninkmeyer. "It was a win-win situation for everybody."

A way of life
Family business is a way of life for many Austrians. Some figures put their number as high as 320,000 or 80% of all businesses. While it is true that many of these are very small in size and turnover, there is a strong desire at all levels to keep businesses in the family and not sell up just to make money, according to Brenninkmeyer. "Austrians are good at seeing opportunities in niche markets and there is now an interesting mix of innovation and tradition."

Interestingly, the family business culture is so ingrained that many forget that other forms of business actually exist. "I was talking to Austrian family business owners at a family business congress several years ago," recalls Brenninkmeyer. "Some were asking why the congress was specifically for family businesses; they didn't understand because they thought they were like every other business – family businesses were the normal way of life to them."

In addition, they didn't initially realise that many of the issues they face are family-related. "One owner told me he didn't have any conflict in his business," continues Brenninkmeyer. "When I asked him if he worried about whether his daily decisions would upset an aunt or a cousin he replied, 'Yes, of course. Every day!' I told him that he didn't need to feel this way if he put the correct governance procedures in place. And he began to realise that he wasn't alone in this."

Moving forward
Erwin J Frasl is the editor of Wirtschafts Blatt, a national business newspaper, who organises these congresses and who established an award for Austrian family businesses. "We hold workshops for families all over Austria," says Frasl. "There wasn't anything like this for family businesses before we started, and we have found that people are interested and want to engage."

"Austria is a very good place for family businesses in comparison with other countries in Europe," he continues. "We are one of the countries with the lowest taxation, we have very well trained workers, and it's a very good place to do business with East Europe."

Frasl is also behind the foundation of the Family Business Network's Austrian chapter, which launched in April 2006, and which he believes is "a great step for family businesses." Heinrich Spängler, the chapter's chairman, is himself part of the family-owned Spängler private bank, which is now in its seventh generation. "Our aim is to facilitate the networking between family businesses," says the chapter's executive director Sylvia Haller.

One thing that everyone agrees on is that entrepreneurialism is a very hot topic at the present time. "There is a lot of activity in this field," comments Brenninkmeyer. "But the notion of entrepreneurialism is not yet fully ingrained in the culture. I am the president of an association called Initiative for Teaching for Entrepreneurship, which goes into schools to discuss the whole issue of entrepreneurship. We bring social partners, such as people from industry and politics, together to aid what we are doing."

"We now have younger generations who are very well educated and who are very good entrepreneurs," says Frasl, who believes the next generation views the whole of Europe as its "home" market. "A lot of [FB] companies have founded companies in Hungary, Slovakia, Slovenia and the Czech Republic – they are thinking European and global," he says. "Compare this to after the war, when businesses were concentrating on re-establishing their companies to get a strong position in the Austrian market."

Embracing the modern era
A final facet of Austrian business is that it is very connected through industry-specific organisations and associations, so everyone in a particular industry is very familiar with each other. "There are obvious advantages to this, but there are also problems as everyone is often given to thinking the same," says Brenninkmeyer. Nevertheless, it is clear that this viewpoint is changing. "We are at the beginning of a long journey," believes Brenninkmeyer, which he says started around 10 years ago and is continuing today. The introduction of awards, conferences and workshops that are raising awareness of governance issues, and the advent of an entrepreneurial generation that is keen to exploit the new emerging markets that neighbour their homeland are proof, if any were needed, that Austria is fully embracing the modern era – and family business is at the heart of it.