Terra

Family Business Portrait

Firms neglect plans for nurturing new leadership

(Illustration: Rob Dunlavey)

Family businesses are the bedrock of the United States economy. But as company founders and CEOs age, failure to plan for the future puts many family firms on uncertain footing.

That is the conclusion of a national survey conducted by OSU and Seattle University with Seattle-based Laird Norton Tyee, the Northwest’s largest privately held wealth management firm. The 2007 survey found that 60 to 70 percent of family businesses with revenues topping $5 million have neglected to lay the groundwork for the next generation of company leadership.

“The most surprising finding of our survey is the lack of formal planning, including strategic business and succession plans, for many family businesses,” says Rich Simmonds of Laird Norton Tyee, who collaborated with OSU’s Austin Family Business Program, which offers succession planning workshops, and Close to the Customer (C2C) program to design and execute the study. “If the trend continues, it could have a detrimental long-term effect on these companies.”

Two big roadblocks hamper planning: the pressure of managing day-to-day operations, and the difficulty of confronting old age, illness, disability and death. Family-business heads tend to see themselves as indistinguishable from the company itself. They often have a tough time imagining the business carrying on without them, the survey found. But if the business is to remain viable when the founder is gone, steps should be taken long before a crisis strikes to designate and prepare a successor, Laird Norton Tyee counsels.

Red flags popped up in other areas, including a lack of written strategic plans and reliance on informal governance structures. “The survey was designed to paint a broad overview of what’s going on in family businesses across America,” says C2C’s Director Nicole Brown, who executed the survey with marketing professor Hal Koenig.

To read the complete study, Family to Family: The Laird Norton Family Business Survey 2007, visit familybusinesssurvey.com.