Family Business

Many family businesses today are in a very fragile position! Ross Nager, executive director of the Arther Andersen Center for Family Business, says, "Few of these companies are prepared for the challenges they face in the near future. Few of them are as prepared as a publicly traded company would be."

There are several significant problems.

Lack of Strategic Planning. More than two-thirds of the companies surveyed have no written strategic plan. Often the CEO has a picture in his own mind of what will happen next. If that's as far as it goes, the firm faces a serious problem if poor health forces her to retire or if she dies in office.

Plans for Co-CEOs. Almost have of the respondents of a recent survey at Mass-Mutuals Family Business Enterprise, reported that two or more family members may serve as Co-CEOs in the next generation. This is typically a fragile and difficult way to run a company.

Weak Boards. Less than half the boards of directors, if any, meet more than twice a year and more than two-thirds go uncompensated. These statistics suggest that family businesses are not building and using strong boards even though many will be called on to play a strong role when leadership changes hands.

So Why Avoid the Planning?

Some research states that it is a conflict between being a fair parent and being a sound businesswoman. As a parent, the founder wants to treat the children equally, which means dividing the wealth. But the businessperson knows that the business should go to the most capable, qualified candidate. Often the easiest solution is to ignore the conflict, never planning for the future.

Solution?

Family run businesses need strategic and succession planning even more than public companies do. CEO's of family buisness serve typically 6 times longer terms - eroding a culture of change. Family businesses rely on estate and tax planning which complicates fudiciary duties.

Unless small businesses get engaged, they could be swamped with the demographic, baby-boomer tide in 5-15 years. Yes, that includes you.....

Go To Page: 1

Articles in this Topic    Discussions in this Topic