Original article by Philip Perry on Restaurant Hospitality
In the best of worlds a family business would thrive for many generations, providing inspiration and revenue for decades to come. Reality, alas, is usually more somber. “Only 30 percent of family businesses survive into a second generation, and only 17 percent into a third,” says Kathyann Kessler Overbeke, principal of GPS: Generation Planning Strategies, Beachwood, OH.
Why? Too often the emotions of family members conflict with the demands of the bottom line.
“Family businesses are made up of two complex, overlapping systems,” says Overbeke. “One is family, and the other is business. The overriding factor that determines success or failure of a family business is management of that space where the family and the business systems overlap.”
Worlds in collision. Failure to manage family-business conflicts can lead to disaster. Consider, for example, the damage that results when siblings compete for the position of company president. Aware of the emotional time bombs linked to any decision on succession, the parents often opt to ignore the issue.
While members of the senior generation typically hope the problem resolves itself on its own, things often spiral downward. “The children are left wondering and confused,” says Ira Bryck, president of the Family Business Center of Pioneer Valley.
Not only do they start taking on unsuitable jobs in the hope of “learning their way the top,” they also continually sabotage one another in power struggles that damage the bottom line.
Similar conflicts abound: A favored son expects to be handed the reins of control; an objective assessment points to a daughter as the most promising heir. One sibling favors an expansion beyond current territory; another sides with parents anxious to preserve wealth for retirement. A daughter’s spouse expects dividends from an inherited ownership stake; management realizes the funds would better be invested in capital equipment.
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