WHY IS FAMILY BUSINESS SUCCESSION SO HARD? AND WHAT SHOULD WE DO ABOUT IT?
Glenn Kurlander
This article examines the difficulties involved in family business succession and how planning that addresses qualitative challenges can result in successful transitions. So, did you hear the one about the family business? You know, the one that, just like only 13% of family-owned businesses in the United States, failed to make it to the third generation? If you have ever attended a program on family business succession planning, you have probably heard that one. And if you have had occasion to deliver such a program from time to time, you may even have told that story. But here is the real punchline. There’s reason to believe that the family business failure rate, which so many of us recite as if it were gospel, is actually a myth. In a fascinating article in the Harvard Business Review,1 Josh Baron and Rob Lachenauer take issue with our common understanding of the limited duration of family-owned businesses. In their article, titled “Do Most Family Businesses Really Fail by the Third Generation?” Baron and Lachenauer maintain that there is reason to believe that, on average, family businesses actually last longer than non-family-owned businesses, and they explain the deficiencies in our commonly held view to the contrary.
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