Over 70% of family businesses fail and more often the 2nd generation aren’t to blame

Having experienced  a failed family business I have now found myself placed within the niche of helping others.

Of course my position is impartial with Business Glu, however I still have the same passion for success, and regularly I see the same traits happening over and over again which prevent family businesses success materialising.

All too often I am observing the founders, first generation, not moving away from the business organically to allow the second generation to achieve.  This may be due to feeling the business cant manage without them, or that if they were honest its that they can’t manage without the business.  The latter is usually the true scenario, they don’t know anything else, they started it and it is regarded one of their offspring, in fact it is sadly MORE important than their actual offspring.

The second generation commonly don’t know anything other than the business, they were born into it and it has always been in their life.  They didn’t get a choice and it was just assumed they were ok that the business always came first.  They struggle with their own personal development due to the business demanding the parents attention and lack of parenting, they are just a bolt on (often a nuisance) to the business.  School appointments, parents evenings, sports days, family time was overlooked as children.  School holidays usually meant either digging in as a spare pair of hands or sitting at a desk with some ‘activity’ to amuse them at the office whilst parents worked.    Family holidays were not as regular as the other kids because work came first, excuses were; other staff were off, too busy, or they just ‘didn’t have time’ (translated as didn’t want to be away from the business).

The childhood they remember are being dropped off places, never saw their parents on the side-lines cheering them on or at the stables watching the lesson.  Their parents were always ‘busy’ but felt they’d played their part by being the taxi, or maybe they’d got one of the employee’s to drop them off? whilst they were ‘at work’.  This was accepted but they knew deep down their parents weren’t interested in anything other than the business.  Being a part of the business was their only way of spending time with them.

Growing up it is assumed they would work in the business like it was a gift, they should be grateful and sadly this is how most second generations of the family business end up there.   Nobody asked them if they really ‘want’ to do it, or even if they enjoy it.  If they were ok not having the same annual leave as everyone else because it meant them being away from the business or that they were given the jobs no-one else wanted (or they could ask) to do, they just do it as they feel that is what is expected of them, want to please and they are loyal. Sadly the loyalty is rarely repaid.

The second generation go through their life continually proving themselves. Either to the parents who don’t even notice what a good job they’re doing, no recognition for their skills, flexibility and experience.  They may say now and again that ‘they’re doing a great job’ but those are just words.  Also proving to the  rest of the staff who have the opinion that they only have the job because of who they are, and  waiting to point out any mistakes they make, or for them to fail, through to the outside world watching, pressurising, to see if they are as successful as their predecessor.  Those that knew them as a child often belittling them that they can remember when they were sat in the delivery van or in the office in the school holidays and weekends whilst the parents did business, condescending and regardless.

The knowledge gained and being in and around the business with all those contacts as a child carries through.  Its engrained that the business is the most important thing, to be recognised in your parents eyes you have to be involved in the business giving your time and efforts on demand, usually the only attention received.

In return the parents believe the second generation are being rewarded, when in fact their wants and needs are being put to the bottom of the pile, not considered or ignored.  The reward in the first generations eyes is that ONE day the next generation will get it all!  This is rarely true.

Circumstances that don’t allow it to happen;

  1. The first generation are so engrossed in the business the second generation see that no matter how hard they try to prove themselves, how hard they work they cannot make them proud and this is so important to them.  They spend their whole lives being loyal, supportive, giving up any free time, endeavouring to follow in the footsteps of their parents in a bid to carry the family legacy on – making the same mistakes with their own families putting the business first (or possibly don’t even have a family of their own due to not ever having a social life to meet someone) but try as they might never are good enough or be seen to be capable.
  2. Poor and unclear succession planning with nothing set in place and the second generation remains purely as another member of staff (just with a better title) until they can’t take any more and leave the business.
  3. The marriage of the parents break down due to strains of the ‘obsession’ of the business and new members marry into the business taking control.
  4. The first generation continues with the carrot and stick method, the second generation loses the passion and the business suffers.

In reality the second generation are aware through their own experience, of the neglect felt as a child of a business owner.   Their own goal is to create a stronger family and business structure, a professional approach, they see the need for separate relationships and the importance of having a family connection out of work more than most.   They’ve had a lifetime of weekends, evenings, family gatherings having the conversation shift to talk shop, they are a commodity that is an extension of the business.  Their feelings and opinions not heard, suggestions overlooked or not taken seriously that many times it either creates conflict if they stand by their opinions or they back down to keep peace. They still have ambition and aspirations for the business even so, the first generation need to see that their ways are not necessarily the best for the business.

The respect shown to the first generation by the second isn’t appreciated or even recognised.  Others voices are heard and all the yes people in the business get supported, the second generation don’t furnish them the truth that others in the business aren’t true performers, maybe even dishonest, for two reasons; 1. They wouldn’t be listened to and, 2. They don’t want their parents upset and hurt.

Even after all the ‘abuse’, disappointment and neglect they feel, the second generation remain fiercely loyal.  They shield their parents from hurt, the truth and even pressures of the business, they are their parents after all.  Maybe the parents don’t have that boundary but their offspring do and as crazy as it is they also have that same love for the business.

Ultimately the second generation may get a promoted title however that’s exactly just all it is.  Being a Director relieves the first generation of the lack of morality they may feel others around them may see if they don’t promote one of their own.  It seems its got them off the hook and being seen to be doing the right thing.  Very rarely do they make them sole director or relinquish their own title, this would make them lose the control and maybe make them look insignificant.   Having non-family member’s alongside their brood keeps themselves in charge, not challenged, at the top and enable them to have their yes people around them whilst keeping their offspring ‘in their box’.

The second generation are fundamental to the future of the business.  They have the knowledge, the history, the passion, they’ve earned the staff’s respect, their stripes as a qualified member of the team by doing all tasks thrown at them.  In addition to all of this they are forward thinking, innovative, have the drive to continue what their ‘hero’ started, have a bucket full of contacts and should be allowed to demonstrate their flexibility, new strategies and ideas.  They would never harm the business and they will always have the business and their ‘families’ best interest at heart……after all the business has always been the only family they have ever known.

Other non-family members , even those married or born into the business at a later date, truly don’t feel what the second generation feel.  Those ‘outsiders’ all have their own agendas whether that be for financial gain or their own grandeur.  They didn’t miss out on a childhood, on the family holidays as children, their parents attended school meetings and nativity plays and the family get togethers they have had throughout their lives haven’t been over shadowed by discussions, conflict or stress about the business.

What they do have though is no threat to the big chiefs at the top that can’t let go.  They aren’t questioned about requested days off, they are given salary increases and promotions when tempted and able to fob people off with their workload demands or whereabouts.  They don’t receive calls when they call in sick checking that they genuinely are ill, just compassion.  Second generations follow the low opinion of themselves and feel they owe all of this to the business as the business is their family.

The family businesses that succeed are those that treat it as a professional relationship.  They show the next generation the respect they’ve earned and have confidence in them, with gratitude for their input, efforts and knowledge.  Clear succession planning that is conducive to the business is put in place at a sensible time in everyone’s lives to ensure not only the business is looked after, the passion is still driven through by those taking over and the first generation take a back seat that is there when support is needed.

Predecessors should be allowed to have full knowledge of the business they founded, they are the entrepreneurial ones that started the company, but as a business arrangement. For a real chance of survival as a successful business reporting should be in a professionally prepared way with respect for those in the businesses time and commitments.  For a business to strive, the younger generation have fresh new ideas and using their inbred skills will demonstrate the continued strength of the business their parents started.  However having the originators jumping in and out of the business gives the wrong message, doesn’t allow the second generation to flourish, it can damage and set the business to fail at a significant speed.

Having the second generation take the business to the next level is a testament to its family and all those that have passed through.  Family businesses have the greatest respect should it be seen to be moving forward and its successors parachuting it into the next century with their new ways, additional qualifications, knowledge and their desire to make their parents proud.   They have the same hunger for the sustainability as everyone else just more important to them to prove that they didn’t get the job because they are family, they’ve earned their stripes and that they can and will continue to make the business as successful as it possibly can.

First Generation, step back, enjoy the fruits of your labour, be proud of your family that even though they may have been damaged by the treatment the business has presented them, they are the most loyal and committed ‘partners’ of the business you will ever meet.   Enjoy hearing of their success, don’t take that away from them, they are the most capable and watch from afar what they do, supporting them, giving advice when asked.

They are your family, think back to why you started that family business.  To support your family, put food on the table and give them a good life.  Not to see it fail, not to give away to others that eventually pose a threat to the business, not to cause conflict and tear the family apart.


No more carrot and stick behaviour.

Second generation shouldn’t be considered second best …………….They’ve earned their place now watch them grow.

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