Creating Family Business Dynasties

How does a family business become a dynasty?

It’s all about the “S” word.

Succession. Not to sound like Captain Obvious, but the key to family business longevity and creating a dynasty is succession planning. If it’s so obvious, why do only 12% of family firms make it into the third generation?

The first generation is the founder and works much like a sole proprietorship. The second generation often gets the handoff while the business is still on a growth curve and there are only a few family members involved. The third generation is more complex because the founder is often not present, there are more family members involved and the business may be reaching the maturity stage.

12 Reasons Family Businesses Fail to Become Dynasties:

  1. Senior generation failing to “let go”
  2. No formal timetable and planning for transition
  3. Lack of confidence in younger generation
  4. Senior generation sense of immortality – “I’ll Never Die”
  5. Taboo subject – too sensitive to discuss
  6. Failure getting family members on same page with strategic direction
  7. Late planning too close to transition event
  8. Reluctance to choose next leader between children
  9. Family members in business because of legacy not genuine interest
  10. Family conflicts left unresolved
  11. Inadequate training and coaching of next generation
  12. Business model fails due to lack of innovation in later generations

Learning from families in business who have been there, done that…

and are still talking to each other.

Dr. Justin Craig
Associate Professor of Entrepreneurship
D’Amore McKim School of Business
Northeastern University
Boston, USA

Family Business

Research continues to highlight qualities that contribute to family business resilience. Many non-family entities are starting to mimic key behaviours such as frugality in good times and bad, judiciousness in capital expenditure and carrying little debt.

Successful family businesses, typically:

  • Understand the importance of professionalizing the family business through the introduction of family governance initiatives that are appropriate to the needs of the ever changing business and family
  • Champion the introduction of initiatives that maintain transparency
  • Distinguish between what is a family matter and what is a business matter
  • Are vigilant monitors of the overall condition of the business and the well-being of the family

They also:

  • Understand that some things are inevitable and discuss these openly
  • Appreciate the reasons why succession is challenging
  • Facilitate next generation aspirants’ understanding of the rights and responsibilities of leadership
  • Consider a role in the business as more than a job, more than a career.

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