Maintaining Family Business Continuity Through Generations

...

Researching about family businesses unable to stay alive has conveyed a need for a solution. There must be a reason for these businesses unable to gain success. When a family owned business is failing to strive, the family must work together to figure out what they are doing wrong. It is essential to avoid ignoring these issues and the owners should not hesitate to try new things. If the family struggles to communicate effectively, the family must use strategic planning to come to agreements instead of making heat of the moment decisions that could possibly harm the business. If the owner isn’t applying leadership skills, then the workers, one’s family, and even customers may not respect the owner. Lacking social and leadership skills will rub off on everyone surrounding the owner and when the owner isn’t respected, many problems occur and things tend to go downhill from there. This brings a call to action that consists of applying the practice of business ethics, leadership skills, and the use of strategic business planning to support the continuance of a family owned business.

Preliminary Research

Only 13 percent of successful family businesses last through the third generation. Less than two-thirds survive the second generation and fewer than 5 percent of all businesses ever started actually become family businesses through appointment of a successor from the next generation. (Ward 3). In the article by John L. Ward on keeping a family business alive, he explains the most common pitfalls that owners face. He mentions that changes in technology, fluctuations in the economy, and even an outside buyer that purchases the company are all common pitfalls that destroy a family business.

Ward mentioned a study conducted in 1975 by Wharton Entrepreneurial Center indicating that nearly half of the 28 family businesses under review were sold because they lacked necessary funds or marketing expertise. The founder of the business must take accountability for everything that happens. Therefore, it is up to the founder to direct the business in a successful path for the successors in order to avoid financial trouble. The founder is responsible for setting up ownership continuity through wills, trusts, etc. Setting up a will explains exactly what the founder wants to happen to the business when the founder is deceased. This includes who will be able to run the business and what percentage of the company each family member will receive. Following this tactic keeps the entire process organized and will save much time and stress.

Family businesses often create rivalry between family members. Sons and daughters are expected to live up to their parent’s expectations which can be a lot of pressure. Jealousy and anger are common emotions that tend to create tension that leads to problems. According to an article by Harry Levinson at the university of Harvard, the most common type of rivalry is between the Father and son. He explains that the founder of the business, the father, tends to view his son as a baby who is incapable of becoming man enough to run the business. Then he adds that the father views the son as ungrateful, considering the sun has grown up spoiled, which causes the son to feel hostile and guilty. It is essential for the father to realize that the fate of the business lies in the hands of his son and must accept that retirement is in the future. The father must treat his son with respect and positively guide him in the direction of leading the business.

Another common type of rivalry in family businesses happens between two brothers. Their competition may be exacerbated by the father if he tries to play the sons off against each other or has decided that one should wear his mantle. (Levinson 1). This problem tends to complicate worse when the mother is directly involved in the business. Mothers have their favorites and sometimes believe in the capabilities of one son over another. Considering one of the brothers is significantly older, the elder brother usually succeeds his father. This can be tough on the younger brother, taking into account that the older brother has a condescending attitude toward the younger brother. Also the older brother has grown up larger, physically stronger, more competent, and more knowledgeable than the younger brother due to the difference in age. (Levinson 1). It is extremely difficult to cope with the problems of the family business. Overcoming these obstacles can be tough, but there is no point in stewing in anger and guilt, this solves no problems. It is up to the founder to make the best decisions to maintain continuity in one’s business.

Family businesses tend to fail primarily because they allow themselves to destroyed due to the owner failing to make the decisions needed to ensure the vitality of their business. In the last paragraph, family rivalries were discussed and the article written by Harry Levinson suggests seeking professional help. Although talking out family problems with a neutral third person may be helpful, an article written by John L. Ward offers a more efficient tactic known as strategic planning. According to Ward, all problems in family businesses began with lack of communication. In order to establish agreements amongst family owners, this article suggests developing such a plan that invests in new strategies that will revitalize the company and promote future growth.

Strategic planning consists of family members meeting face to face whenever necessary to address the business needs and goals. Using effective planning generates more information and reduces uncertainty through better understanding. This allows the owners to open up to one another and share ideas that will increase the ability of the business. The family is now able to discuss important interests through planning. This may include something as simple as parents asking children if they are interested in joining the business or asking them what roles they envision for themselves in the company. Planning helps ensure both the family and the business recognizes critical issues. As mentioned before, rivalry between family members is a common pitfall that will lead to problems. Planning offers the family an opportunity to discuss and decide exactly what will best benefit the continuity and future success of the business.

Conclusion

After discussing the problems that tend to happen within family restaurants, will the practice of business ethics, leadership skills, and the use of strategic business plans support the continuance of a family owned business? The answer is yes. By following the ethics of business, the family owners are held accountable for making sure that every decision made is morally right. Implementing