Family run businesses should be like any other businesses. But in most cases, they are not.

Family owned businesses have a significant impact on our economy. According to the Family Firm Institute (http://www.ffi.org/?page=GlobalDataPoints):
• Family firms comprise 80% to 90% of all business enterprises in North America
• Family owned businesses employ 62% of the U.S. workforce
• More than 30% of the family owned businesses survive into the second generation, and internationally, these numbers increase.

It’s clear that family-owned businesses are a big deal to our economy. It’s also apparent that the approximate 30% that survive into the second generation also means that approximately 70% don’t.

Would better survivability matter? In our opinion it would, especially since survivability implies longer-term employment and more economic stability.

There are common reasons why approximately 70% of family owned firms don’t survive into the second generation, such as the children and other relatives aren’t interested in the business, or are working there but aren’t really invested in it or their role. It’s also interesting to note (as reported by the Family Firm Institute) that only 37% of family owned businesses have a strategic plan, and 85% of those businesses that have identified a successor say it will be a family member.

Which gets us to an important point – employing family members in the business. This may seem obvious – of course family-owned businesses will employ family members. But the real questions are:
• Are they qualified and capable?
• In what role?
• Did they earn their position?

There is an interesting article in the January-February 2012 issue of Harvard Business Review titled: Avoid the Traps That Can Destroy Family Business. The authors listed three traps:
1. The trap that “there is always a place for you here”.
a. To address this be sure that you are hiring family members who are at least as qualified as non-family candidates
2. The reality that many businesses can’t grow fast enough to employee the family members for are seeking employment (or whom you may feel an obligation to employ)
a. To address this it’s important to manage the entry of family members into the business
3. Family members remain in silos based on bloodline
a. This prevents cross-functional training and the way to address this is to appoint non-family members as mentors

Family owned businesses are a major contributor to our economy. Many are small, but some (like Ford Motor Company, Wal-Mart, Levi-Strauss and Nordstrom) are large and well known.

If you own or run a family business, take a moment to think about its current state. What are you doing now to ensure that the business survives and is set up to thrive after you leave? To help you address this, we advise family run business executives to start by asking themselves:

• Do you have a plan for business growth?
• As the key leader, do you have a personal exit plan?( Remember, biology and accidents often trump the ideal planned exit.)
• Do you have viable successors for key roles?
• And, how are you preparing potential successors?

For additional information on succession planning and other topics on Business Growth see our blogs, free articles, white papers and videos at: www.kubicalaforestconsulting.com

Copyright 2012 Kubica LaForest Consulting