A family business for many of us
conjures the images of the neighborhood grocery stores selling from bread to
batteries. Over four-fifths of businesses are family-owned, generating over
two-thirds of global GDP, with mom-and-pop shops forming the bulk.
Strange as it may seem, but over
70% of the family businesses do not last over one generation. Family businesses
run the world, and yet most of the time, they themselves cannot comprehend how
to continue running.
The biggest mistake family
businesses commit is finding it difficult to handover the business baton to the
next generation. Squabbles over succession and patriarch’s belief that he is
indispensable, kill generational entrepreneurship.
It has been observed that when the
patriarch hands over to the next generation, most businesses fail. This is the ‘crunch
time’. It will be a mistake if business families do not take heed to this
historical evidence.
Let us take a few recent instances
where lack of foresight on the part of immensely successful patriarch may kill
their business in the near future. The veteran Italian octogenarian designer Giorgio Armani has not announced who
would replace him at the helm of the company. A similar story goes for the
other fashion designer known world over – Roberto
Cavalli. He too has so far failed to find someone to take over the company
that bears his name.
These two instances of Italian
fashion gurus not deciding on their successors could be recipes for an
impending disaster when it comes to maintaining the legacy of the hard work
done to build the internationally known high-end style brands.
Statistically speaking, globally 1
in 2 families will need to pass their baton to their next generation in the
next 5 to 7 years. Just imagine the risk these businesses run, if they do not
handle the next-generation transition well. Theoretically, there is a fifty percent chance that these businesses may turn turtles sooner than later!
What is the lesson to be learnt
from the mistakes of many?
Do as good chefs do for complicated
recipes – break it up into stages and cook!
To avoid internecine tussles and to
display professionalism, business reigns could be handed over in stages. First
hand over the management control and ownership. The founder-entrepreneur
could pass on the management to his children or siblings retaining the
shareholding with himself. This is a good way to handle a generational
transition.
Bharti, Bajaj, BMW, Fiat, and Ford
have executed generational change very well down the ages.
Not taking seriously successful
succession subjects will be a grave disservice to business continuity.
To Know more about Family Business faux-pas check out our latest book Who Blunders and How? by Robin Banerjee
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ReplyDeleteIt's interesting to see how familiar family business faux pas can impact both relationships and the success of the business. Understanding these pitfalls and addressing them early can really make a difference in creating a healthy and successful family-run business.
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