Family Business Life Cycles

It’s pretty much common knowledge that products as well as businesses and, in fact, entire industries have life cycles that require adjusting if they are to survive over time.

Individuals, families, family businesses and their ownership also experience life cycles. Many of these have significant impact on the family as well as the business. Some of the milestones, for example, include a child becoming an adult, marriage, children helping out in the business, senior family members retiring or becoming incapacitated, divorce, remarriage, and so on.

In addition to milestone events, there are differences in leadership approaches and styles within family businesses. First generation family businesses are typically characterized as having an entrepreneurial spirit headed by a sole founder. Typical, also, second generations are characterized by a sibling partnership and third generations by a cousins’ consortium.

This blending of family members and styles is magnified with each new generation. For example, I happened to watch an episode of Undercover Boss several weeks ago. This particular installment featured White Castle, a family business now in its 92nd year. I didn’t have time to count, but there were easily 25 to 30 people sitting around the boardroom table, all family members.

Given the fact that most entrepreneurs seem to have –– and perhaps it’s a prerequisite for entrepreneurial success –– an authoritarian leadership style, it stands to reason that a major source of conflict comes from differences in leadership styles of first and second generations. It’s definitely not uncommon for this to occur in family businesses, and it’s not a bad thing.

My experience is that the second generation may naturally have or require a more collaborative leadership style – contrary to the founder’s style – to accommodate the increase in stakeholders.

By the third and fourth generation, the family begins to separate into branches. That’s what the boardroom table at White Castle looked like –– almost several separate businesses under the same umbrella.

And as far as White Castle is concerned, I couldn’t begin to predict not only the differences in work style, but also the divisions that have occurred between those that work in the business and those that do not.

The challenges increase when a focus on growing the business overlooks the needs of family members, as equity family members and future leaders in the business.

The good news is that life cycles are typically always survivable. Recently, for example, I had a conversation with a young man –– married with no children –– whose introductory statement was that his dad had fired him twice. It was obvious that differences in the leadership needs of the business, as well as different leadership styles of father and son, contributed to the problem.

We helped the father and son to understand the unique qualities and benefits of each other’s leadership. And we helped them move beyond the conflict, develop a vision for the business and the family in the next generational, and to work collaboratively on the business as well as on a strategy for the family in the next generation.