Long Term Success of the Family-Held Business

by Jamie Flinchbaugh on 06-08-10

Last week I spotlighted some success and failures in family-held businesses in Zildjian versus Viacom. When done poorly, the family can destroy the business, or the business can destroy the family. How can you avoid some of the bad outcomes? I think two major factors must be considered: influence and succession.


Influence must help the family and the business maintain the long-term vision. Family businesses must think multi-generational, not just multi-quarter. Having the right influence at the right time can make all the difference.

The key to influence in a family-business is someone, or ones, who can provide honest feedback. The is just as important on personnel matters as business decisions.

First, consider at least a board of advisors if not board of directors. The provides a forum, a process, and a body of continuous feedback. It not just in a crisis, but something that the management and the family can learn to trust over time. I prefer a board of directors, because it cannot be ignored. The directors must actually make decisions, not just give input, and that provides a much greater conduit to earning trust.

Second, consider one layer of professional management to help transition from one generation to the next generation. The most successful model I have seen work consistently is the strong COO. This is someone that reports to the CEO, often a family member, but the next generation as they rise through the ranks reports to the COO. The COO knows they will never become CEO because that is not how it is set up. Because of this they can focus on what’s important – helping maintain a constancy of purpose from one generation to the next. This is more like a consiglieri than an operational COO.

Third, a key aspect of influence is not just at the top but as other managers influence the next generation as they come up through the ranks. Too many family members pick assignments based on the assignment itself. Instead, these assignments should be selected based on who the individual reports to. That manager can have, if they have the ability to be honest with that individual.


There is no longer-term impacting decision than how generation after generation is selected and developed.

The first mistake made is putting people into power too early, and not giving them the time to develop. Sometimes, this occurs unintentionally due to death or other causes. But when planned, it is helpful to plan a transitionary period with a professional, but trusted, executive.

Outside leadership experience, and not just work experience, is important. It is important to learn to lead when your name isn’t on the door. I would rather have a successor work in the company when young, then leave to manage elsewhere, and then return, than only take outside experience in the early years.

I also recommend that each family member that may be in a succession path have an outside mentor. This shouldn’t be a family member, or someone with any other stake in the business, including being close friends with the parents. The mentor must be trusted with the individuals inner thoughts, and not worry about who that might get back to.

And finally, succession planning and learning must not be limited to just being a good manager. Whether a role in management is wanted or not, there are two other roles that require learning – family member and shareholder. Representing the family either inside the business or outside is something that can and should be learned. And being a shareholder, while a legal right, is not just a matter of inheriting or buying shares. Learning their role, what to get involved with and what not to, how to select board members, how to understand the business – all of this requires education as well.

Family-held businesses are unique, and represent a much greater portion of the economy that most people realize. Their challenges are unique, and must be managed as such. Running a business for long-term success is hard enough; injecting the complexities of family into the middle of that can make it harder, but also, more rewarding.

I congratulate the families who had the vision and courage to start their business, and those who has the wisdom to see it sustain across generations.