Although the first directors who manage to start a company from scratch do great things, the new generations have to understand that the company is not the same as when their father directed it, the times are not the same, nor the market, nor the challenges, moreover, not even the company is the same.
To promote a family business, the first challenge is in the minds of the new generations and their fear of ‘destroying’ something well done and solid. However, keeping things as they are is not always the best option and the numbers say so: only three out of 10 family businesses survive the change of the first generation and only one survives the third.
Recipe to end a business
So, what factors influence so that so few businesses can reach the third generation? The answer to this question is multifactorial.
First of all, it must be taken into account that these types of companies face a series of specific challenges to achieve their permanence for more than one generation. The lack of institutionalization and professionalization of family businesses are some of the aspects that work against this objective.
survive the founder
The retirement or death of the founder of a family business is a severe blow that can put the company at risk, especially when the leaders monopolized decision-making in the business and when an organized succession plan was not developed.
The departure of the founder generates a climate of instability when there are no mechanisms to smooth the change of command or there is no solid structure that allows the organization to function without this figure.
This situation is more common than you might think. The lack of leadership from the founder can generate disputes within a family business to the point of causing its failure.
Therefore, each generation must plan how the change of direction will be made, which implies the development of a board of directors and a board of directors, with a view to making collegial decisions so that the company does not have to ‘improvise’ in these situations.