We are often asked to resolve succession issues within multi generational family business. In many ways issues that exist with family businesses can also appear within long established professional firms.
There are often many complicated inter related issues that causes problems at this critical time in the long-term success of the business or partnership.
We have found over the years that these issues can be summarised under one of four areas.
However, the major barrier to the smooth transition of family businesses to the next generation is true open communication. I will discuss the other three areas under future articles.
In many instances there exists the proverbial ‘Pink Elephant in the Room’ i.e. an obvious problem or risk that no one wants to discuss and therefore is ignored.
This may be an issue that has grown up over the years that various family members are aware of but no one is prepared to name. There maybe fear that the naming the elephant will cause a major rift in the family and so the issue is not confronted. There is no straight talking to bring the issue out into the open. However it does not go away, it just festers and grows.
The result is resentment, lack of focus, possibly the creation of warring factions. Sometimes the pink elephant is so large it can ultimately have a destructive impact on the business and could mean talented family members leave or the business has to be sold outside the family or in worst cases the family breaks down – a high price indeed.
It’s not surprising that when we look at the statistics that some 73% of family businesses want to keep the business in the family but only 33% make it to the second generation and only 9% to the third.
Interestingly, studies also show that 57% of family businesses have no defined plan for succession, which perhaps is a direct result of not confronting the pink elephant in the room.
Follow our website link to have a look at some of the reasons that open communication can be an issue specifically within family businesses, but also can be relevant to professional practice
To see the full series click here.