The Future of Family Businesses
According to Nation’s Business, the leadership of more than 40 percent of America’s family-owned businesses will either change or begin to shift by the year 2002. Such large-scale changes will bring both challenges and opportunities to these businesses. One expert worried that with so many companies facing succession issues in the near future, disagreements between family members over estates and wills may become more common.
The vast majority of firms that planned a change in leadership (92 percent) expected that ownership of the family business would remain within the family. But the nature of that leadership may change in other ways. One-fourth of the firms said that it was likely their next CEO would be a woman, while 42 percent thought it likely that their company would name co-CEOs. Ross W. Nager, executive director of the Arthur Anderson Center for Family Business, warned that parents should avoid naming co-CEOs just to placate their children who want the job: “Only qualified, competent, capable, motivated people should be in the CEO spot.”
Finally, some leaders of family-owned businesses near retirement age, only to find that the list of candidates to carry on the business is a distressingly short one. “As many disappointed family business owners learn too late, it’s dangerous to assume that a son or daughter will follow you into the business,” wrote Sharon Nelton in Nation’s Business. “Just because you, without question, followed your parents into the family firm doesn’t mean your children will do the same. Today’s young people have more options than ever before—more to lure them away from the family enterprise.”
James Lea, author of Keeping It In the Family, recommended five ways in which current leaders of family-owned enterprises can attract future generations to keep the business afloat after their retirement or death.
- Expose family members to all aspects of the business, including employees, customers, products, and services.
- Define the business’s attractive qualities in terms that will appeal to the listener.
- Recognize those factors that have the potential to dissuade family members from staying involved in the business. These factors can range from personal interests that lie in other areas to conflicts with other family members.
- Reward family members who decide to join or stay with the family business. “The ‘price’ successors pay to join and operate your business may include giving up career options that are financially and personally attractive,” noted Nelton. “It may mean loss of privacy, or the tension that occurs between parent and child when their management styles conflict. Lea says a business may make compromises—such as making it possible for the successor to spend more time with his or her family or hiring an interim senior manager to buffer conflicts between parent and child. But the company’s ‘cost’ and the successor’s ‘price’ must be affordable to both.”
- Give family members outlets to explore their ideas, interests, and concerns.
Finally, Nelton said, “marketing doesn’t end once you have successfully brought your children aboard. You have to continue selling them—and their families—on the challenges and rewards of your company.”
FURTHER READING:
- Ambler, Aldonna R. “The Legacy: Family Businesses Struggle with Succession.” Business Journal of New Jersey. October 1991.
- Bowman-Upton, Nancy. Challenges in Managing a Family Business. Washington: U.S. Small Business Administration, 1991.
- Bowman-Upton. Transferring Ownership in the Family-Owned Business. Washington: U.S. Small Business Administration, 1991.
- Lea, James. “The Best Way to Teach Responsibility is to Delegate It.” South Florida Business Journal. July 25, 1997.
- Lea, James. Keeping it in the Family: Successful Succession of the Family Business . New York: Wiley, 1991.
- McMenamin, Brigid. “Close-Knit: Keeping Family Businesses Private and in the Family.” Forbes. December 25, 2000.
- Nelton, Sharon. “Family Business: Major Shifts in Leadership Lie Ahead.” Nation’s Business. June 1997.
- Rowland, Mary. “Putting Your Kids on the Payroll.” Nation’s Business. January 1996.
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