The Landscape of Family Business

For the 25th Anniversary edition of Family Business Review, my coauthors and I published a review of 12 years of outcomes used to measure family business performance. We worked with family business experts to rate the relationships among these outcomes, and then used a statistical procedure to create a map of family business outcomes we call the Landscape of Family Business.

The Landscape map visualizes important areas of concern for family business owners on two dimensions, 1) a business--family dimension and 2) a short-term--long-term dimension. Combined, these dimensions create four quadrants—short-term business, long-term business, short-term family, and long-term family.  The center of the Landscape is dominated by governance—how owners make decisions designed to obtain desired outcomes for family and business in each of the four quadrants.

The primary focus for most business owners is in the short-term business quadrant. Here they concentrate on being entrepreneurial and effectively providing a product and service so the business will survive. However, to continue the business for the next generation of owners, a family business owner must also be concerned about outcomes in the long-term business quadrant, which focus on business strategy. Unfortunately, research shows many family business owners spend most of their time only on short-term outcomes. So, like almost 70 percent of family businesses, they don’t endure to even the second generation.

Those who govern also must also be concerned about outcomes in the short and long-term family quadrants. In the short-term, owners must assure that the next generation is satisfied with and committed to both the business and the family, so they will be interested in taking on future ownership and management. In addition, they must prepare family members to become next generation business and family leaders for the long-term.  Research shows that succession of leadership is one of the greatest challenges for family firms.

The Landscape of Family Business reveals the breadth of challenges family business owners must navigate in the short-term, while at the same time preparing for the long-term in order to establish a family business that endures for generations.

Ritch Sorenson, Ph.D.

Ritch Sorenson, Ph.D., is the Opus Chair in Family Business and the academic director of the Family Business Center at the University of St. Thomas. “The Landscape of Family Business” is the top-cited article in the 25th Anniversary Edition of Family Business Review. In June Sorenson gave the keynote address on this topic at the Family Enterprise Research Conference, the largest gathering of family business scholars in the Western Hemisphere.

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