So naturally many feel protective and reluctant to step back. A good handover is crucial for the business, but it can also have a big impact on relationships within the family. Where there are several children who wish to be involved, someone needs to decide who will take which role.
There is always the risk that someone will feel left out. The best succession plans are based on a cool-headed appraisal of the different strengths and preferences of the next generation of potential leaders. That might mean favouring younger siblings over elder siblings, skipping a generation or going outside the family. One of the best ways to address these issues associated with Succession planning is by:. Another way which I feel has been successfully implemented across family-owned businesses likes of Tata group, Hindalco or in some of the Middle Eastern family-owned businesses.
But that perception could not be further from the truth. On average, the data suggest that family businesses last far longer than typical companies do. A single study, decades old. Where did that three-generation idea come from? A single s study of manufacturing companies in Illinois. That study is the basis for most of the facts cited about the longevity of family businesses. The researchers took a sample of companies and tried to figure out which of them were still operating during the period they studied.
They then grouped the companies into year blocs, roughly representing generations. First, its core findings are often described incorrectly. Many describe the results to say that only one-third of family businesses make it to the second generation.
But the study actually says that one-third make it through the end of the second generation, or 60 years. A study of 25, publicly traded companies from to found on average, they lasted around 15 years, or not even through one generation.
If the average company joined the index in , it would stay there for 61 years. Many of the world's oldest and most respected businesses are family owned. By identifying family with business, the firm can promote a brand of security, loyalty and commitment. Fundamental principles of business are not applicable. Traditional business education is not catered to meet the complex demands of a business family.
Central issues like family dynamics, succession planning, family governance and communication are often overlooked in MBA programs, business degrees and continuing education courses. Families wanting to ensure successful succession of their businesses should seek out specialized education in the business family field.
The Business Families Centre at the University of British Columbia provides education and support to business families and family enterprise advisors, including lawyers, wealth managers, accountants, coaches and family therapists. Our free weekly small-business newsletter is now available. Every Friday a team of editors selects the top picks from our blog posts, features, multimedia and columnists, and delivers them to your inbox.
If you have registered for The Globe's website, you can sign up here. Click on the Small Business Briefing checkbox and hit 'save changes. Follow us on Twitter: globesmallbiz Opens in a new window. Report an error. Editorial code of conduct. With the above in mind, here are three recommendations to help protect against potential business divorce. Give control to one person. Ideally, family members should not do business together. If a family does decide to start a business together, one person should be in control.
When two siblings have equal power, for instance, they are more likely to fight over issues unnecessarily. When one has a controlling interest in the business, the others have no choice but to go along.
Document everything from the start. Set parties expectations and contributions from the beginning. Seek professional help. With the advent of the Internet, too many people use self-help.
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