IT’S NOT JUST FAMILY SUCCESSORS THAT FIND IT TOUGH TO FOLLOW FOUNDERS

Craig Aronoff

Research pointing to the fact that family businesses outperform their non-family peers have also shown that performance in subsequent generations of family businesses does not tend to be as strong as it is in the founder generation.  In a Forbes Magazine piece pointing out the challenge confronting Steve Jobs’ successor Tim Cook, Scott DeCarlo observes that successors to iconic company founders generally don’t fare that well.  During Bill Gates tenure as CEO of MicroSoft, for example, the company’s annualized total return was 58%.  In the five years after he left the CEO slot, the company’s annualized return was –11%.    Bernie Marcus at Home Depot had an annualized return of 47% but his successor managed “only” 25%.  Other examples are also given.

It is not just the next generation successors in family businesses that are challenged by the record of their business’s founders.  All successors face that issue.  Being compared to one’s parent, however, can make the comparison seem more dramatic and even painful.  Being a successor is no easy job.

One thought on “IT’S NOT JUST FAMILY SUCCESSORS THAT FIND IT TOUGH TO FOLLOW FOUNDERS”

  1. Adding onto your post, I just want to point at the fact that many founders created their companies in favorable conditions like a growing market and little competition. Instead, their successors receive a business in a stagnating market with fierce competition and mature products. Not easy to shine in those conditions.

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