I was recently listening to a Harvard Business Review Webinar where they were discussing leadership lessons learned from great family businesses. There were several fascinating thoughts that came out of this webinar, but one that stood out to me was the dramatic decline in the success of family businesses when leadership was passed down from the founders to the 2nd, 3rd, and 4th generation. Egon Zehnder and the Family Business Network surveyed 89 executives of top companies in their respective industry and geographic market. The study was done in 2014 with the intention to discover what made these top family businesses successful while so many others seemed to fail. The webinar quoted research conducted by the Family Business Institute to show the difficulty of family business succession plans.
Percentage of family businesses that last into the:
In this Webinar Egon Zehnder and his team revealed several key elements they discovered from their research of successful family businesses. Without going into detail about each, here are the highlights:
5 Elements of Successful Succession in Family Businesses
1. Successful family succession plans understand the organization’s unique family gravity. That is they understand the underlying family members with the force that is behind their success.
2. Successful family succession plans establish a strong and structured leadership succession process. In other words they don’t just simply pass the baton to the next generation.
3. Successful family successions have a clearly defined corporate governance process. Decisions can’t be made on a whim like they are at home within the family.
4. Successful family successions have a clear understanding of what is needed in the family business leader. If those traits aren’t obvious in the next generation there must be a different succession plan developed.
5. Successful family successions must carefully manage the integration process.
The full article from the Harvard Business Review can be found at www.hbr.org/2015/04/leadership-lessons-from-great-family-businesses.
It’s clear that family businesses have many obstacles to overcome when determining whether or not the son or daughter should take over the family business. You owe it to yourself to carefully consider the important factors that are key to the continued success of the business that you’ve worked so hard to build. The numbers don’t lie. Over 70% of businesses fail after the 1st generation. If you have your doubts as to whether your children can do what you’ve been able to do with your business you need to think about what your other options might be. There are other ways to insure that your years of hard work aren’t wasted. Every child has different dreams, passions, and talents. Many times those are vastly different than their parents. If you’d like to consider what your options might be I’d love to help you think through your specific options. You can contact me at firstname.lastname@example.org.