Some of the best businesses I have ever seen were family businesses. Tragically, they are at the highest risk for failure. I have seen a lot of family businesses come and go, with a heavy emphasis on the go.
Part of the reason for the high failure rate is that family businesses have a higher number of stakeholder groups compared to nonfamily businesses. In a nonfamily business, stakeholder groups typically are owners, staff, and staff who are owners. Once you bring family into the mix, now you have owners, staff, family, owners who are staff, staff who are family, family who are owners, and family who are owners who are staff. Yes, it is hard to track all that!
Due to the increased number of stakeholder segments, the potential for conflict goes up exponentially. Conflict is not conducive to wise business growth and planning. As Lewis Braham reports (“Keeping It in the Family” Bloomberg Businessweek, 4/25/16–5/1/16, p. 50):
“Only about a third of family-owned businesses survive into the second generation, 12 percent make it into the third, and a mere 3 percent to the fourth, according to the Family Business Institute.”
If a family business is going to survive and thrive, then the leadership team must be completely on top of its strategy for succession planning. The company’s vision, mission, core values, talent management, and business plan must be under constant review. Apparently, few people know how to handle their business and their family with the finesse needed for success on both fronts.