Forward Thinking Business Blog –
Across Ireland and the UK, family businesses employ many thousands of people, supporting local communities and making a vital contribution to the economy. Yet it is estimated that fewer than 30 percent of family businesses survive the second generation, and only 3 percent survive the fourth.
One reason why cross-generational sustainability is a challenge is that family businesses tend not to be naturally good at managing change. An overly-conservative business culture, a leader reluctant to let go of the reins when the time comes for a new generation to take the business forward, inadequate resources to fund succession, failing to keep up with industry developments or new technologies — these are all factors that can impact cross-generational sustainability.
Effective strategic planning will address many of these issues but implementing the plan will always be less effective if emotional factors are allowed to influence decision making. This is one reason why it is a good idea for family businesses to include non-family members on their board.
An interesting study aimed at helping cross-generational family business growth using a Family Business Success Model was recently discussed in the Journal of Organizational Change Management. The study authors J Sreih, R Lussier and M Sonfield found that family business owners can improve their probability of success by
- adopting a team-management decision-making approach,
- handling conflict effectively,
- formulating specific succession plans,
- developing strategic plans,
- using sophisticated financial management methods, and
- dealing effectively with the founder’s influence.
These are themes FPM has frequently discussed in our Client Matters newsletter and at our family business workshops. We also stress the importance of having clear core values for the business.