Thoughts On Family Business

I grew up and participated in family business. As a matter of fact, every job I’ve held has been for a family business. The company was owned wholly, operated and managed by one or more family members. I held a position in my family’s business, then operated as a top manager and leader as a non-family member in my subsequent career before becoming a consultant.

It’s interesting that most of the things you read and learn regrading business do not take the family aspect into consideration. Even some of the largest, publicly owned corporations are at their heart, family businesses. These would include examples like Wal-Mart, for instance.

Here is some interesting research data about family business:

Less than 30% of family-owned companies survive into the 2nd Generation
Only 10% make it into the 3rd Generation
Only 4% make it into the 4th Generation

A couple of things I have picked up from working inside family businesses that work well:

1. Family members can not work in the business unless they are as able and as good as a non-famiily employee.
2. Family members are treated not as equals, but actually a little worse than non-family employees 
3. No matter how many family members are in top management, one top position is always filled by a non-family member (this usually comes as a result of growth and/or expansion
4. Family business works as long as family members are willing to yield to each other’s expertise and strength. Once this ends, it’s the beginning of the end
5. Family members must go outside the business and have some success when starting their career before coming to work for the family business
6. When you are in growth mode, you must fill all key staff positions with non-famiily members. Growth requires that these positions become so important  they can not be satisfied by any but the most competent family member, which is usually not readily available or existent.

A couple of things that throw wrenches in the family business include:

1. Lack of respect for one another and agreement over direction by family members
2. Management Succession (who should be in line vs who is in line vs who is available to be in line)
3. What the business needs and what the family wants tend to collide and explode

If there is not enough capable expertise and counsel available outside the family and business to help guide these issue resolutions, you can see what many family businesses do not survive into succeeding generations.

Your thoughts on family business?

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