OREGON STATE UNIVERSITY

New Research Outlines Critical Steps for Family Businesses

06/29/2007

CORVALLIS, Ore. – A comprehensive national survey of family business leaders by Oregon State University researchers has found that fewer than 30 percent of owners have succession plans – and nearly half are operating without a written strategic plan.

The survey was conducted Mark T. Green, director of the Austin Family Business Program at OSU, and Hal Koenig, director of the university’s Close to the Customer Project (C2C Project).

It is the most comprehensive survey of its kind.

“We wanted to show both the positives and the negatives from all around the country,” Green said. “What families can learn from this survey is that they can learn from the challenges and opportunities many other companies face everyday.”

Some of the surveys other findings include:

  • Nearly 60 percent of majority share owners in family businesses are 55 or older and 30 percent are 65 or older, but fewer than 40 percent have a successor lined up.
  • Two-thirds of family businesses do not require family members to have the qualifications or related experience necessary to be successful when entering the business. Twenty-five percent think the next generation is not competent enough to take the reins.
  • Ninety-three percent of respondents have little or no income diversification, deriving the majority of the family’s income and security from the business.

Seattle-based investment management firm Laird Norton Tyee, commissioned

the project. Researchers from Seattle University’s Albers School of Business and Economics also assisted on the study.

The project, called “Family to Family: Laird Norton Tyee Family Business Survey 2007,” surveyed nearly 800 family business leaders from across the country – 83 percent of whom identified their title as CEO, president, chair of the board or vice president. Survey questions covered business histories and futures, management and governance structures, and the influence multiple generations of families have, and will continue to have, on the businesses. Each company reported more than $5 million in annual revenue.

“In our collaboration with Laird Norton Tyee, it became clear that we needed to get information from the decision-makers at these family-owned firms,” Koenig said. “We also wanted to get a cross-section of responses from across the U.S. and from different industries – the results indicate that we did well on these goals.”

The project grew out of a roundtable discussion held by Laird Norton in 2005. Family business leaders expressed frustration, not with the day-to-day operations of their firm, but with long-term planning. Laird Norton set out to establish a new baseline of information for family-owned businesses with data more relevant to their needs than previous studies.

“The top family business leaders in the country made it clear that they need to heed the warning signs and stop putting off the planning process” said Rich Simmonds, managing principal at Laird Norton Tyee. “Family businesses are the heart and soul of the American economy and we’ll continue to build resources to support them.”

The full results of the project can be found at www.FamilyBusinessSurvey.com.