By Adrienne Mollor
Family and business? Let’s face it, it’s a difficult enough challenge for some families to get through a meal together let alone make business and financial decisions and come out in one piece. When many of us think of family businesses, we think of corner stores, small “mom and pop” operations.
What about family corporations such as Walmart, Samsung, Cargill, Porsche, Swarovski and, for those of us on the East Coast, Market Basket and Cumberland Farms? Family businesses in the US account for more than 30% of all companies with sales in excess of $10 billion, according to the Boston Consulting Group’s analysis. Family businesses, typically without external shareholders, are able to make decisions quickly and with flexibility, providing them a great model for today’s ever changing marketplace.
With a family business, there comes a certain level of obligation and commitment. You are creating something for the next generation. This ownership effects how decisions are made at all levels. Additionally, all members of the family have to buy in to the time spent on the work at hand. You can discount the complaints about spending too much time at work when you are doing it for “yourself”. Don’t get me wrong, I don’t feel all family members will always have the same level of commitment or work ethic, but hopefully there is an overall sense of shared pride and ownership. There is no hiding or jumping ship. Your business and family’s reputation is on the line.
Family businesses are great opportunities but can also present hurdles. How do you determine a successor if it is a family business with multiple children waiting to take over the lead? What if the next generation does not have the skill set to run the company? What are you doing to prepare the younger generation in learning the business, developing expertise, and how to manage and lead? Are they starting at the bottom like everyone else and have to earn promotions, or are you starting them at the top? It’s not a monarchy that is clearly laid out. These challenges have to be seized as opportunities to communicate, to develop talent, to create an agreed succession plan and strategy for short and long term success.
According to research by the Family Business Institute, only about 30% of family and businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. Research indicates that family business failures can essentially be traced to one factor: an unfortunate lack of family business succession planning.
In many situations, we have worked with companies to help define a clear succession plan tied to the strategic direction of the business. Critical planning and time needs to go into determining who will run an organization today or in its next phase. The more time you have to assess and develop that individual(s) and establish them, the higher the success.
