These alarming statistics beg the question:
What is going wrong with family businesses and the succession process?
Surely, the owners of family businesses cannot be held solely responsible for these succession failures. It is the author’s contention that professional advisers to family owned and -operated businesses need acknowledge that they are in part responsible for the dismal performance experienced by family businesses at succession. Far too much attention continues to be paid to the technical component of succession (e.g., tax minimization, estate freezes, family trusts, buy-sell agreements, wealth management, etc.) with far too little attention being paid to the people or non-technical component (family communication, family expectations, family values, family competencies, family dynamics, etc.) of the succession process. We will refer to the “people” or “non-technical” component of the family business succession process as the “family component.”
The existing literature and ongoing research on family business continues to promote the need to address the family component in the succession process. It is recommended that a significant or major portion of the succession activities focus on managing the family expectations and the family dynamics. This is achieved by actively integrating the family into the process. Professional advisers tend to be more comfortable working through the technical components rather than the family components of the family business succession process. Even though it may be viewed as more challenging, it is the people component that is the most important since it is the people or family members who will ultimately decide if the succession works or not. It is the inability to effectively manage the family component that has proven to be the major stumbling block for family businesses in the succession process.
Professional advisers to family businesses need to incorporate into their advisory services proven strategies to assist family business owners and their successors in
managing the all-important family component. It is no longer sufficient to inform them of the need to do this. They need to be advised on how to do it. This will be the overriding theme of this family business succession book.
Some family businesses successfully manage their management and ownership succession plans while preserving family and business harmony. There is no reason more family businesses cannot achieve similar outcomes. There is a proven approach to family business succession planning that produces better results. By applying this proven approach, we hope to reverse the alarming succession statistics.