Management Development and Succession in Family Owned Businesses

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More than 90 percent of U.S and Canadian businesses are owned and managed by members of a single family. Most family-owned businesses do not survive the second generation. The average life expectancy of such businesses is roughly 25 years.

Families create, develop, and destroy their enterprises in a generation's time. Their businesses bring wealth, pride, and influence, but they also bring frustration, discord, and bitter estrangement. Many families create wonderful businesses, then destroy them. Family disputes can wreck a world-class business. Business disputes may ravage family relationships and dissolve the bonds of love.

How Accountants Can Help

Accountants in public practice know all too well that the most vexing problems in many client businesses are related not to production, marketing, finance, or systems development, but to family issues, such as who gets which job at what salary or who will be boss in the next generation. Business decisions are tainted by family considerations. Family decisions are tainted by business considerations.

The overlap of two incompatible systems lies at the heart of virtually all family business issues and problems. On the one hand, there is the business itself, a mixture of talented people and other resources, organized for specific purposes, with its own culture, vocabulary, and pecking order. The business must be continually revised to adapt to an ever-changing world. On the other hand, there is the family, formed and developed by the luck of the draw and organized in its own quirky way. The family, too, has its own culture, vocabulary, and pecking order--but they are based on biology, birth order, and tradition. Change typically is infrequent, poorly-managed, and controversial.

Both at home and at work, the two systems clash. Family considerations drive business decisions; business considerations drive family decisions. The young person who …