Family...

triarch establishing the company to provide for the family. The second generation inherits the business and grows it, then comes the third generation to squander it. Studies show that seven out of 10 affluent families will lose the family fortune by the end of the second generation. By the end of the third generation, nine out of 10 affluent families have blown through the family wealth, and many have suffered terrible family strife.

Research indicates that family business failures can essentially be traced to several factors:

* Forbidden issues. Lack of trust and misunderstandings in the family lead to conflict avoidance, lying and hiding things from each other

* Lack of meritocracy. The inability of next generation offspring to cultivate the requisite skills that match those needed by the current and future business environment

* Lack of clarity. The lack of planning and governance at the business, family and ownership levels

* Weak or misaligned values. Lack of common understanding of what values the company and the family lives by, and wants to preserve

* An unfortunate lack of succession planning. Founders and owners are notoriously poor at planning for the future of their businesses. For one, death is not an easy subject to talk about; nor is retirement, especially for rugged individualists and entrepreneurs or their families.

A family business without a formal succession plan is asking for trouble. We often hear this statement from business leaders, “No doubt, my children are being groomed to lead the business eventually but they are too young and inexperienced to make critical decisions.”

Family business leaders, particularly the founders, often neglect the issue of succession because they are so protective of the business they started. Although they want their ventures to survive them and to pass the torch of leadership on to their children, they seldom support their intentions by a plan to accomplish that goal. They just dream of continuing the business long after they’re gone but take no steps to make that dream a reality.*