The Trouble with Family Businesses

Feb. 22, 2014
Can you spell families without lies?

Family ties are strong and sometimes way too strong and distorting the view and in worst case paralyzing the whole management in SMEs.

Just recently I looked at a Northern European technology company. Sales going down several years in a row, now below 20mioEuro.

The non family CEO left the company due differences with the board.  The youngest son of the founder has taken over as a CEO. The board consists of two family members, of which one is the CEO, plus one external. The external one has no experience whatsoever in the respective industry and has mainly only held political positions.

This pattern is reality in many family owned and lead SMEs.

According to a PWC study of family businesses, which is comparing the situation world wide to German speaking region, only 20% of family businesses in German speaking region do have external CEOs. World wide over 31% of family businesses do have non family member CEOs.

Some studies claim that over 20% of all family business succession cases fail. That is a lot of economic potential at jeopardy and substantial amount of value is destroyed!

Familybusiness owners should look objectively at potential new CEOs, including their own family members. They should only choose the best possible available  person to lead the family business in to the future. This might or might not be a family member and this is something family business owners should accept.

Managers are not always good delegating or handing over responsibility. And particularly family business owners often still do want to control everything, even after handing the helm over to a perfectly capable person.

Letting go in leadership is certainly one of the hardest pats. But letting go is crucial for the further success of companies.

Letting go in leadership has nothing to do with ones education. I have seen leaders being obsessed to control that have come from best business schools and high ranking ex-military officers.

Letting go is a mental state, which can get on your nerves and cause sleepless nights!

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