The national media periodically provides stories about families in business that are embroiled in intergenerational squabbles, financial tugs-of-war, pending divorces and firings of key family members. Reading copy such as this, one would surmise that there are few family-owned businesses that are truly success stories and that family firms, by their very nature, are doomed to fail. Not so.
Looking at the number of famous American families whose names are still very much in the positive limelight, a case can be made that many families can successfully work together and pass on businesses from one generation to the next, with a minimum amount of angst or anguish.
What are the positive characteristics that seem to carry these families over the rough spots they encounter when dealing with succession and other family-business issues?
Experts in family businesses, such as Craig Aronoff (founder of the Family Business Forum at Kennesaw State College and author of many publications on the family firm) will state that families who have a well-developed family-business mission statement are off to a good start. Knowing why the family is in business and what the family’s values are that translate into the business are keys to family business longevity.
Second, families that are open to communicating with outside advisers, sharing not only financial data, but also emotional considerations, tend to weather the trauma of transitions better than others.
Third, developing mechanisms to resolve conflict in an open, direct manner serves to clarify and settle issues before they become festering problems which will resurface at the oddest, most inopportune times. As an example, I have witnessed an oldest brother, who never accepted or understood that the youngest of the founder’s children would become president, actually push the new president younger brother at a family retreat!
Fourth, the family makes time not only to work together, but also meets regularly at family retreats or board meetings to discuss the future and keep each other informed as to how the business is progressing. By the way, these families invite all shareholders, both insiders and outsiders, spouses and in-laws to such gatherings and they also have some fun!
Fifth, the founder allows his or her children to make mistakes while the founder is still at the helm, to provide the children with actual experience of running portions of the family business, but not to the extent that major damage could result. As a part of this “error allowance” factor, the founder makes sure that successors have the necessary training and take professional development classes to give them the skills needed to take over from him/her at some pre-determined future date.
Lastly, and very importantly, the founder has hobbies outside the family business. By having other interests, a founder can more easily hand off the reins of leadership to the next generation without feeling they have lost their life’s focus.
Eddy, CFP, is president of San Diego-based Creative Capital Management Inc. and co-founder of the Family Business Forum at USD. She can be reached at firstname.lastname@example.org. Comments may be published as Letters to the Editor.