How To Avoid A Dysfunctional Family Business

Family businesses are famously susceptible to bitter, divisive battles; 88% fail by the third generation. Searching for the keys to long-term success, James Hunt, a management professor at Babson College (huntj@babson.edu), studied five successful family firms that are at least 20 years old, ranging in size from two to 200 employees. Several characteristics the firms shared amount to "best practices" for family-run companies. 1) A focus on business, not family, needs: Don't use the business as a family employment agency or loan center. 2) Reinvestment: Don't suck the company dry. 3) Caution with family: Forestall potential conflict with precautions, such as two or three months of debate before hiring family or dispensing generous severance packages to discourage draining litigation. 4) Delegation: Don't be a control freak. 5) A big-picture view: Consider all stakeholders--from employees to local community--in making decisions.

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