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Why 70% of family businesses never make it to the next generation?

August 2, 2018

Why 70% of family businesses never make it to the next generation?

 

 

While by now I know the answer, what I’d like to really focus on the 30% that do make it! The press gets the horror stories of families that don’t get along, or sue each other in court and that makes the front pages. I’d like to share the other statistics.

 

My background is family business and when I came across the above statistics I was very intrigued as to how the other 25% did manage to pass it down to the next generation.

 

My research took me to different family businesses across the USA that actually were more than 1stgeneration some even 5thgeneration and I interviewed their CEO’s and came to the conclusion that there are common practices that most of them practice and that is the secret of their success.

 

So what are the best practices?

 

  1. A board that holds the leadership accountable and meets continuously.

  2. Formal family meetings in which family and business are discussed.

  3. Strategic planning where the family and the business align themselves to the goals.

 

I then came across a NYT article dated Aug 29. 2001 from a Dr. Astrachan which focused on these and other predictors of multi generational succession.

 

 

Others will also require that family members must work out of the business for a period (2-5 years) before getting a job in the family business.

 

Some will require independent board members and that decisions such as succession planning; salaries, etc., are made by the independents directors.

 

In my work with family business, I also incorporate these and other best practices that ensure multi generational continuity and more importantly, prosperity.

 

For example, I use assessments and evaluations for family members (and others) to ensure that we are putting “the right person in the right seat in the right bus”, especially when it comes to succession.

 

I emphasize weekly leadership meetings, where we prioritize and review goals and create both transparency and accountability.

 

Experts also say that leadership training, culture evaluation, effective communications, etc. all contribute to creating a family business culture that both family and non-family understand their roles and goals and appreciate what each brings to the table. 

 

All organizations must be intentional about their culture and leadership otherwise it will go in a direction that most probably no one intended.

 

I know because it happened to me…

 

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