Family Business 



Opportunities and Pitfalls 



Ihomas D. \:>avidow and Richard L. Narva 



There is probably no single type of business that 

 offers such incredible opportunities for success 

 or such potential pitfalls as the family-owned 

 business, just look at the statistics: more than 90 per- 

 cent of businesses in the United States are family- 

 owned; thirty-five percent of the Fortune 500 corpora- 

 tions are family-controlled; family firms produce one-half 

 of the GNP; and family businesses employ one-half of 

 the nation's workforce. Yet, only 30 percent of family 

 businesses succeed into the second generation and only 

 ten percent into the third. Why? 



While family businesses must deal with the same 

 business issues as any other enterprise, they also face 

 an additional set of issues — issues around family rela- 

 tionships. All too often a person's role in the family is 

 re-enacted in the workplace. For example, the boss is 

 still "dad", the vice-president of sales is still "my little 

 girl," or the older brother is still the one who won't 

 share anything with his 

 younger siblings. 



All the powerful emotions 

 inherent in these family re- 

 lationships get acted out in 

 the workplace, too. The re- 

 sult? Business decisions 

 are made emotionally, not 

 rationally. Family feuds get 

 acted out in the boardroom. 

 The business suffers. And, 

 nine times out of ten, the 

 business dies by the third 

 generation. 



So, how do you beat the 

 odds? How do you separate 

 family issues from business issues in the family busi- 

 ness? How can you keep the family happy and the 

 business profitable? How can you ensure that your fam- 



UNH OFFERS PROGRAMS 

 FOR FAMILY-OWNED BUSINESSES 



The Center for Family Business at the Whittemore 

 School of Business and Economics offers a series of 

 seminars that deal with all critical aspects concerning 

 the family in business. Topics such as succession plan- 

 ning, entry/exit and other governance issues, family 

 meetings, equal vs. fair equity for siblings, as well as 

 certain successful business practices are covered 

 through-out the year. 



For information, call the Center for Family Busi- 

 ness, UNH, at 603-862-1107. 



ily business is the one in ten that makes it to the third 

 generation and beyond? 



First of all, plan for succession. Perhaps no single is- 

 sue in family business is as emotionally loaded and 

 complex as who will take over the business next. All 

 too often, a vague reference, such as, "Someday, all this 

 will be yours," is the extent of it. 



The best thing to do is to talk about it now. If you 

 don't, issues of control never get addressed and fights 

 will erupt. The topics to address include: What are the 

 skills and qualifications required of your successor? 

 When will the change in command take place? What will 

 the founder's role be? Is a non-family member the best 

 choice for successor? 



Finally, provide training for your successor. Write out 

 the qualifications and skills necessary for the presi- 

 dent's position. Provide experiences to your candidate 

 that will develop those qualifications and skills. This 



means more than under- 

 writing business seminars 

 or workshops. It means 

 allowing your successor 

 to learn by doing and by 

 making decisions he or 

 she will have to make as 

 boss. Family firms that 

 manage to prosper and 

 grow through the genera- 

 tions are usually the 

 ones that have given each 

 new generation the room 

 to prove itself by taking 

 the business in a new 

 direction. 



Another guideline to running a family business is to 

 give the responsibility for evaluating and supervising 

 family members to a non-family member. By putting a 



OCTOBER-fNOVEMBER 1996 



