Family businesses are particularly vulnerable when coping with the speed of economic, industry, and competitive change. While the members of a founding family can draw on their powerful feelings of loyalty and love to sustain the business in its early years, the same family ties can inhibit change when later generations inherit the business. The family business system, once a source of innovation and creativity, can sustain a profound conservatism. This conservatism is not a sign of pathology but instead is the direct consequence of the family’s source of strength. Its virtue can become its weakness. Three issues relevant to all family businesses are particularly important:
1. Strategic imperatives and family life cycle events are often out of phase.
Stages in the family life cycle such as the founder’s death or children entering the business often provoke changes in the business.1 However, these life cycle events may unfold too slowly. Just when the family expects to transfer the legacy of the business to the next generation, the business’s capacity to create and sustain the family’s wealth may be undermined. External pressures and business responsiveness often do not correspond with unfolding family cycles. As competition rages and the need for decisive action is paramount, planning for or making a leadership or ownership change can destabilize both players and the firm, exacerbating an already anxiety-filled... To read the complete article, login or sign-up using the form below.
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