Southern Indiana Business September-October 2020 | Page 8

PAID ADVERTISEMENT
Stages of Successful Family Business Transition
By Kathleen Hoye, CExP, ACFBA, CFWA
Consulting Principal, Family Business Advisory Team Leader,
MCM CPAs & Advisors
As family businesses transition from
one generation to the next, they experience
common “tension points” that, unless
proactively addressed, can impede longterm
sustainability. These tension points
account for why Family Business Institute
reports only a third of family firms survive
to the second generation, and 12% to the
third.
To survive, family firms need to progress
from a purely entrepreneurial culture,
through professionalization, toward a
managerial culture. Hopefully this can be
done while keeping alive the entrepreneurial
flame that ignited the company to begin
with. By the third generation however, the
goal should be to establish a company that
is so professionally managed, it would be
hard to tell that it is family owned except
for the name on the door and the positive
morale shared by everyone involved.
The first-generation founders of a business
are purely entrepreneurial and driven
by either necessity (I have to put food on
the table) or personal goals. They tend to
use their gut instincts and even trial and
error to make decisions and are informal in
their approach. This is what makes start-up
companies so exciting to work for. There
no formal roles, processes or “rule books”
established and everyone does whatever is
needed to keep the lights on and the motors
humming. Decision-making is generally
concentrated in one person, the founder,
“A professional
management team
must be established for
a family business to
scale up and grow”
who tends to adopt a “command and control”
approach to management. Everyone
is accountable to one person, The Boss.
Ownership and Management Control
are generally concentrated in one or two
people.
8 September / October 2020