Pruning The Family Tree: Research Into Fourth-Gen Succession

In a recently published report – Good Fortune: Building A Hundred Year Family Enterprise – Massachusetts-based research firm Wise Counsel, aimed to uncover the unifying characteristics underpinning the success of long-term family businesses.

Thirty-eight companies in at least their third generation – all of which were approximately 100 years old – were involved in the study, which was conducted via interviews with family members.

The majority were in the process of transitioning from the third to the fourth generation, and the research found that none of the 16 businesses that had already completed this transition still included 100% of the family members that would have been eligible to be in the ownership group.

Buying out family members, according to the authors, is necessary for succession because it gets rid of next-gens who only view the business as a source of income, and are unwilling to give up short-term profits for reinvestment.

However, shedding family members can be an emotionally charged process, especially if they are unwilling to leave, according to John Tucker, an adviser at the UK-based International Centre for Families in Business.

He told CampdenFB: "There are issues of power and control if there is more than one family involved in the business and issues of fairness and equality for siblings from the same family, and there are also issues of emotional ownership."

He did agree with the report's authors when they said that once a member had started to view the family business purely as a source of cash, it was often extremely hard to get them to get them to change their perspective and think long term.

But Tucker said it was very important never to generalise when it comes to a family business, as no two are alike and the will all be run according to the family's unique management philosophy.

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