Business dynasties bound to fail: study
"By the time third generation has taken the helm, the problems tend to accumulate," reports a recent study.
By TNN |
MUMBAI: Family wealth won’t pass through more than three generations, goes a Chinese saying. The adage still rings true when it comes to Asian businesses. The region’s family-owned businesses are likely to fail when it comes to handing over the business to the next generation.
The failure often occurs as more relatives and other stake holders join the company, making the decision making process complex, states the ABN Amro private banking and INSEAD study. By the time the third generation has taken the helm, the problems tend to accumulate and magnify, adds the survey.
Some other reasons for the failure is the tendency to put off succession and wealth till the last minute, or it being postponed indefinitely. Sibling rivalry, abilities of women being discounted for the sake of tradition and disharmony between the business and goals of the individual also often contribute to the misery.
The qualitative survey was conducted among 33 high networth (HNW) families in Asia and 25% respondents were Indian.
The annual turnover of family businesses represented in the survey was distributed evenly among brackets of $5 to $25 million, $25 to $50 million, $100 to $250 million, and greater than $250 million.
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The survey also covers sibling rivalry, something the Indian reader would be able to relate to quickly. “Disagreements between family members are seldom about corporate strategic issues, but are founded in sibling rivalry arising from unfinished business when they were children,’’ states the survey.
One South Asian family in the survey reported an epic family split, with two brothers holding irreconcilable views on the future strategy of the business they inherited.
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