Why Only 12% of Family Businesses See a 3rd Generation

Research at the Family Business Institute states that only 12 percent of family owned businesses (FOBs) make it to a third generation.

A primary reason for this is that leaders usually pick and choose family members (FM) based on emotional need or wants rather than wise business selection practices.

Placement is even worse. It is often sexist and ageist. Eldest sons get top jobs. Daughters rarely run departments that are driven by profit and loss statements. For these reasons and more, working with family complicates the already daunting task of owning a business, and it’s tough not to take work problems home with you.

The best approach is to realize that family is family...and business is business.

We suggest that our FOB clients ask themselves the following questions when they are considering hiring an FM. Both the family members who are employees and those considering joining the business should answer these questions and discuss them. Be clear about your answers before moving forward:

• Do you have shared values?
• How would the business benefit from the personal strengths of the FM candidate, including both natural conative abilities and skills/experience?
• Would the owner/founder and other decision makers give the candidate the freedom to act on his/her strengths?
• How would the FOB benefit from these contributions?
• How would the FM benefit from joining the team?

Building on strengths

The basic ingredients of sustainable success we’ve discovered and thoroughly tested in other FOBs are these:

• Identifying and using the three ways everyone needs to contribute: thinking, feeling, and doing.
• Providing roles that give each FM the freedom to contribute their natural conative, instinct-based strengths to the business.
• Forming collaborative teams that work effectively to provide solutions to the business’s problems and opportunities.

If an FOB doesn’t have a process in place that sticks to these guidelines, there’s a nightmare in store.