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The business of families

  • Story Highlights
  • New business school book examines family businesses
  • Many firms are family-based, but they bring particular challenges
  • One difficulty, authors note, is passing company to a new generation
  • Next Article in World Business »
By Peter Walker for CNN
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LONDON, England (CNN) -- Families have certain dynamics -- complex, fluid and emotional -- while businesses have very different ones. So what happens when the two combine?

One sort of family business: James Gandolfini as Tony Soprano.

As an innovative new book by a leading business school explains, this very much depends.

Countless thousands of successful businesses around the globe are family run. But at the same time, a high percentage of them fail to reach a second, let alone a third, generation.

Every family faces "challenges and issues" over communication and other areas, notes Randel Carlock, a leadership professor at leading France/Singapore-based business school Insead, and co-author of the book, "Family Business on the Couch: A Psychological Perspective."

"Families struggle because being part of a family is very difficult and in a family business it's twice as difficult because of the often conflicting overlap between your family system based on love and your work system based on performance," he says.

The book, co-written with fellow Insead professor Manfred Kets de Vries, adds what the authors call a "psychodynamic" perspective to the issue.

"The book isn't about issues or answers as such, but approaches this topic from a new perspective of considering the underlying family psychology," Carlock says.

Using a series of case studies about family businesses, both successful and chaotic, the authors look at a series of issues including how family ties work in a business context and ways to manage generational conflicts and transitions.

"What we observe in family businesses is that the transition from the entrepreneur to the second generation, and then from the second generation to the third generation are critical," notes Carlock.

"If you can make those two transitions, then you've got processes in place and you've got experience but until you've done it, it's very, very difficult."

A key example of this, used by the authors, is that of Sam Steinberg, a Hungarian immigrant to Canada who established and built up a multi-billion dollar chain of supermarkets.

"Within three years of his death [in 1978] the business was bankrupt and liquidated," says Carlock.

"The book uses this case to show readers what went wrong, why his four daughters turned on each other, what happened to leadership within the family and the business and what effect gender had."

Fact Box

FT MBA Rankings
1. Wharton, U.S.
2. Columbia, U.S.
3. Harvard, U.S.
4. Stanford GSB, U.S.
5. London Business School, UK
6. Chicago GSB, U.S.
7. Insead, France/Singapore
8. Stern, NYU, U.S.
9. Tuck, Dartmouth, U.S.
10. Yale, U.S.
Source: Financial Times 2007

A more recent example is Wall Street Journal publishing group Dow Jones, owned by the Bancroft family for more than 100 years -- until, that is, last August.

Carlock says the family made a series of errors in their handling of the business, including poor communication and a lack of clear goals.

The quirk, of course, was that Dow Jones was purchased by another family-run company, media tycoon Rupert Murdoch's News Corp. A further twist is that at 76, Murdoch now faces succession issues of his own.

Murdoch is "exceptional" at the organizational tasks the Bancroft family failed at, Carlock notes.

"Where Murdoch is going to have a challenge is when he passes ownership and control to his next generation.

"He is certain to have a conflict between his third wife and his children from an earlier marriage. The transition from an entrepreneur to an entrepreneurial family is never easy, a blended family only creates a another level of complexity." E-mail to a friend E-mail to a friend

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