Communication and education key to long-term family business success
“Only 10% of business families manage to maintain the family business and/or the family wealth for more than 3 generations. If you take the 100 wealthiest families in the USA 100 years ago, you will see that most of them have disappeared from the rankings or have been replaced by new more successful families. These findings beg the question: why is it so difficult to stay
successful as a family in the long run?” – Edouard Thijssen
Shirtsleeves to shirtsleeves in three generations
When asked in a survey about the reasons why it’s so difficult for families to achieve long-term success:
- 37% of US family business leaders point to investment risks
- 26% point to cyclical and financial markets risk
- 16% point to political and tax risks
- Only 7% point to weak family dynamics.
Yet, Thijssen reports on research by Williams and Pressier which shows that, in reality, 60% of failures are due to lack of communication in the family, and 25% are due to lack of education and preparation of the next generation. Only 3% can be attributed to financial planning, taxes, and investment risks.
Long-term family business success
This suggests that most family business leaders believe that the main risks for wealth preservation are in the business or market side, when often the weakness is in the family dynamics, stemming from a lack of trust, communication and education. This happens in part due to the complex and emotional nature of family relationships.
“Family issues are very personal by nature, involve a lot of emotions, and tend to be quite complex. Many families often do not want to talk about them – resulting in family ‘taboos’.” – Edouard Thijssen
Thijssen suggests that families need to appoint a key family member to be responsible for communication and education in the family, to bring these issues front and center to the family discussions and priorities.
Communication and education strategy
Thijssen provides some suggestions on how communication and educational strategies should be set up and implemented in the family context. Begin by establishing where things stand regarding communication and education in the business. Ask:
- Is there transparency within the family?
- Are family members satisfied about the information they receive and their role in the family?
- Are there any taboos or unapproachable topics?
- Is the next generation well prepared or well educated (on family business matters)?
Once you’ve been through this process, and confronted the underlying issues, it’s important to develop a communication plan, which should include:
- What should you communicate about? What are the sensitive topics and issues that should be addressed and discussed?
- To whom and with whom?
- When and how often?
- Through which channels and tools?
- How will you measure success?
A committee can provide enormous support to the designated advocate of communication and education in the business, and help to develop the education plan, which should include:
- Which attitudes, skills, values and behaviours should your ideal family member acquire?
- At what age?
- How can you, as a family, help each family member to develop and adopt the right attitudes, skills, values and behaviours? Which education initiatives and programmes can we develop internally or with partners to foster a better learning environment?
- How will you measure success?
For more information on Williams and Pressier’s research:
Williams, R. O. & Preissier V. (2003). Preparing Heirs: Five Steps to Successful Transitions of a Family Wealth and Values. San Francisco, CA: Robert D. Reed Publishers.
For the full article, read The importance of communication and education for long term family business success by Edouard Thijssen on the Family Business Wiki.