What captured my interest this week was the argument that family businesses are only successful while led by the first generation. The second and third run it down.
In Germany there is a nice saying that applies:
"The first generation builds it up, the second retains and the third generation destroys it."
I think this is not necessarily true, it rather depends on the family and its conditions. From my point of view families can succeed over generations, they just have to be open-minded and to a certain amount stay flexible.
This indicates that if the founder of the family has children, but none of them has the demanded qualifications, the interest or is simply not capable of running the family business, a suitable external should be employed to do so.
The following article shows and proves that families in Europe successfully run, own and control their businesses for several generations, some of them even for decades.
http://www.campdenfb.com/article/europe-s-top-25-family-businesses-and-leaders
Cheers!
Isabell
Although we are rather expected to 'provoke and evoke', I personally like this post, as the third generations’ failures are first of all not true in general. There are too many exceptions – as your link proves, too! ☺
ReplyDeleteFurthermore, to children of company founders, this German saying is truly demotivating, as it does not explain which cases this applies to: first, because children were in a way pressed to take over the business although they were not competent enough - as Isabell stated, but there is also another reason.
From my own observation, in many of those 3rd generation failure cases, the managers were not too incompetent for no reason, but one often-neglected cause is wrong education.
As we had already discussed in class, the second generation is often still able to successfully continue the business as they themselves have experienced their parents while founding and raising the company, with lots of fighting spirit, strenuous effort, struggles and hard times. But the third generation often has no true clue of these backgrounds, and (which I want to add to our discussion) those children are often automatically spoilt because of the business’ success that has been built over the years, and because of their accumulated personal wealth. However, one of the key factors that family business members need to teach their children is really down-to-earthness, discipline and industriousness, because when being wealthy, this is in most cases sth. that humans automatically tend to unlearn – but which are character traits that are indispensable for running a business successfully!
Further, from my experience (-and to support Isabell’s post by adding another factor), later generations often just “retain” or even ruin their family businesses as many of those managers truly feel being pressured by most of the stakeholders who expect them to run the business in the way AND in the same quality it was managed by the founders/their parents, which is a) the wrong thinking, b) impossible in reality, and c) an inexpressible stress to those new fam.bus. managers, which leads to a vicious circle.
So in some cases, it is actually additionally the firm’s environment’s fault when fam. businesses already fail during the second generation, for example, as those new managers are not really allowed to be “flexible”. From my point of view, the society’s general attitude (or this can at least be applied to Germany, as it is my experience) towards family business’ successions really needs to change: new managers should be allowed to change their parents’ strategies and styles, and they should be given a new chance, instead of being expected to copy their parents. A new management inevitably makes a company a new one, so children should be allowed to be individual, new managers.
children are usually (but not always for sure) raised with this great attitude towards the family business: they are involved in it from early days, they can see their fathers or mothers doing their job, therefore they feel a part of something they cannot imagine their lives without. probably, this way of bringing up sometimes let children feel the same (or at least similar) passion toward the business. grandchildren for some reason are not brought up the same way and they lose this sense of unity with their families and their businesses; no one can built anything upon the business that does not inspire them. that is one point. another one is that some families act quite wisely and seeing the lack of interest or skils from children or grandchildren they hire trustworthy professional managers, still having the ownership
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