Phil Phillips, Contributing Editor02.09.18
The Predicament
In North America, there are privately held companies with a mix in revenue size ranging from very small ($2 million) to medium ($450 million) to very large publically owned multinationals with an undertow of consolidation but with small startups as well. Nascent entrepreneurs along with second, third and fourth generation entrepreneurs in this industry are many times perplexed with the complexity of their businesses as they grow. They often experience a faltering of their revenue growth and profits or even complete failure of their business as certain time-related events occur such as a “viable purpose” or “vision loss.”
Rationale
In management over the past 50 years, based on empirical data it has been observed that closely held firms appear to encounter difficulty growing both in revenue and in profit once the business reaches certain threshold levels of maturity and perceptible self-sufficiency. This phenomenon is not easily tied to a precise sales revenue plateau. (Marino, 1990) This unverified set of empirical observations also noticed that at some business maturity threshold level, one of several occurrences were present:
• The founder was recently deceased;
• The founder established and practiced other interests (hobbies, etc.) distancing him/her from the business core;
• The founder decided it was time to delegate more responsibilities to his direct reports;
• The founder’s children became more involved in the business;
• The children wanted to make changes & the founder did not
The damping or leveling off of sales and profits at some observed threshold was sometimes averted when the entrepreneur (founder) or next generation leader (owner) had a new or modified strong vision for the enterprise.
First generation has the drive, vision to achieve a planned set of objectives. Then at business optimization, either the founder first generation “kicks-in” another vision or the second generation does.
The second generation usually has enough “rub-off” with and appreciation of the founder’s drive and enthusiasm that he/she creates another vision to carry the company forward successfully. The third generation usually has little incentive to learn and to imagine (vision) what the business future will be due to earlier generations letting the third generation have a ”pass” on hard work. There is a set of disciplines that can avert this common third generation failure phenomenon.
In North America, there are privately held companies with a mix in revenue size ranging from very small ($2 million) to medium ($450 million) to very large publically owned multinationals with an undertow of consolidation but with small startups as well. Nascent entrepreneurs along with second, third and fourth generation entrepreneurs in this industry are many times perplexed with the complexity of their businesses as they grow. They often experience a faltering of their revenue growth and profits or even complete failure of their business as certain time-related events occur such as a “viable purpose” or “vision loss.”
Rationale
In management over the past 50 years, based on empirical data it has been observed that closely held firms appear to encounter difficulty growing both in revenue and in profit once the business reaches certain threshold levels of maturity and perceptible self-sufficiency. This phenomenon is not easily tied to a precise sales revenue plateau. (Marino, 1990) This unverified set of empirical observations also noticed that at some business maturity threshold level, one of several occurrences were present:
• The founder was recently deceased;
• The founder established and practiced other interests (hobbies, etc.) distancing him/her from the business core;
• The founder decided it was time to delegate more responsibilities to his direct reports;
• The founder’s children became more involved in the business;
• The children wanted to make changes & the founder did not
The damping or leveling off of sales and profits at some observed threshold was sometimes averted when the entrepreneur (founder) or next generation leader (owner) had a new or modified strong vision for the enterprise.
First generation has the drive, vision to achieve a planned set of objectives. Then at business optimization, either the founder first generation “kicks-in” another vision or the second generation does.
The second generation usually has enough “rub-off” with and appreciation of the founder’s drive and enthusiasm that he/she creates another vision to carry the company forward successfully. The third generation usually has little incentive to learn and to imagine (vision) what the business future will be due to earlier generations letting the third generation have a ”pass” on hard work. There is a set of disciplines that can avert this common third generation failure phenomenon.
