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July 29, 2013

Successful leaders can sow the seeds for the downfall of a family business

Family business can sound perfect but the patriarch can become an unchallenged tyrant without them realizing the level of their own power. Harvard Business Review has a terrific article on this topic by Josh Baron and Rob Lachenauer :

Sometimes it's the most successful leaders who sow the seeds for the downfall of a family business.
Carl was one of the most talented leaders of his generation. When he took over the family business, it was a struggling $10 million automotive parts distributor. Now after thirty years of being at the helm, Carl has developed a $2 billion company that is a leader in logistical services to hospitals in Europe, and also owns four other distribution businesses. At one point, Carl had 48 direct reports and had personally hired each one. At the same time, he cared deeply about his family and made sure that everyone was well taken care of.
But there was a darker side to Carl's success.
Although his first act was one of the best ever, he became a "problem patriarch," a very hard-driving alpha leader who hired superb talent within the family and the business — and then consistently undermined that talent.
He drove his sister out of the company by placing her in a succession of dead-end jobs. His uncle resigned from the board saying that he wouldn't be part of a "paper board," in which Carl effectively made all the key decisions. Carl responded by maneuvering to buy most of his uncle's shares. In the process, he created a leadership vacuum that threatened the very legacy he had worked so hard to build. Read more.

Jacoline Loewen is a director at Crosbie, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. You can follow her on @jacolineloewen and @crosbiecompany
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