The third-generation problem

By Mike D'Alexander

April 2013 - There is a saying about family-owned businesses: The first generation builds a business, the second runs it and the third ruins it. Not all companies have the longevity of the Zildjian Cymbal Co., Norwood, Mass., which according to the Family Firm Institute, Boston, is the oldest family-owned business operating in the United States. It was founded in 1623 in Constantinople and moved with the family to the United States in 1929. Today, Zildjian has a 15th-generation family member involved with the company.

Statistics from the FFI estimate that more than 30 percent of all family-owned businesses are successfully transferred into the second generation, and only 12 percent will still be going strong into the third generation. If you’re wondering, only about 3 percent of all family businesses are operating at the fourth generation and beyond. 

Despite these low numbers, in my 20 years in the metals industry I have known several family-owned companies that have second-, third- and fourth-generation family members hard at work in the business. Their success is due in large part to the fact that each generation takes its family tradition seriously. Each has a great deal of respect for and knowledge of the hard work and values of the first generation who built the business from the ground up. 

In March, Modern Metals published a feature on Farmer’s Copper, Ltd., Galveston, Texas, a successful service center operated by the third-generation with several fourth-generation family members working for the company. And, in this month’s cover story, “A family atmosphere,” O’Neal Industries is maintaining its traditions through generations of growth. The company also is operated by the third generation and has a fourth-generation family member involved in the business. 

As a co-owner of a second-generation, family-owned publishing company entering its 20th year, I have great respect for family businesses like Farmer’s Copper and O’Neal Industries. Trend Publishing is the second publishing company my dad started in his lifetime. In 1993, Trend was founded with just two magazines, including Modern Metals. Prior to 1993, my three brothers and I were working elsewhere in publishing and advertising.

When my brothers and I started working for Trend, we believed it was our responsibility as the second generation to learn as much as we could from our father, respect the foundation he put in place, preserve it and grow it. As we moved into company ownership, our thoughts haven’t changed. It is our responsibility to the first generation to work hard to preserve the company’s legacy. 

That’s true for all generations following the first. They need to listen to the generations that came before them, commit to a common goal and move the company forward. Any business needs strong leadership and employees willing to head in the same direction. The rest comes down to timing, luck, finding the right people and good old-fashioned hard work.MM

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