Succession planning in the family firm

A new study reveals that family firms run by eldest sons perform relatively poorly in comparison to those run by an outsider.

by The McKinsey Quarterly
Last Updated: 23 Jul 2013

It may be that the combination of having an outsider at the helm - chosen because he or she is the best person within a wide pool of talent - combined with the known advantages of a family-run business - such as its ability to take a long-term view - provides the best of both worlds.

In the study, the UK and France had the highest rates of eldest sons in charge of family firms and the US and Germany had lower rates. It is possible that eldest sons sometimes perform poorly because they expect to inherit the firm and therefore do not train or educate themselves with the same intensity as those candidates who have to fight for their position in the wider talent pool.

The study suggests that family firms should pay special attention to succession planning and not always assume that handing over to the oldest son is the best policy.

Source: The McKinsey Quarterly, 2006, No. 3
Who should - and shouldn't - run the family business
Stephen J. Dorgan, John J. Dowdy and Thomas M. Rippin
Review by Morice Mendoza

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