Family Business Succession.Managing the All-Important Family Component
While the majority of family business owners would like to see their business transferred to the next generation, it is estimated that 70% will not survive into the 2nd generation and 90% will not make it to the 3rd generation.
These alarming statistics beg the question:
What is going wrong with family businesses and the succession process?
Surely,the owners of family businesses cannot be held solely responsible for these succession failures.It is the author’s contention that professional advisers to family owned and-operated businesses need acknowledge that they are in part responsible for the dismal performance experienced by family businesses at succession.Far too much attention continues to be paid to the technical component of succession (e.g., tax minimization, estate freezes, family trusts,buy-sell agreements,wealth management, etc.)with far too little attention being paid to the people or non-technical component (family communication,family expectations,family values,family competencies,family dynamics, etc.)of the succession process.We will refer to the “people”or“non-technical” component of the family business succession process as the “family component.”The existing literature and ongoing research on family business continues to promote the need to address the family component in the succession process.It is recommended that a significant or major portion of the succession activities focus on managing the family expectations and the family dynamics.This is achieved by actively integrating the family into the process.