More than half of the family-run businesses in Connecticut lack a succession plan, according to a joint study published this week by the Connecticut Business & Industry Association and the Center for Family Business at the University of New Haven.
The 2012 Survey of Family Businesses reported that more than three-quarters of those polled (77 percent) consider it important or very important that they leave a positive, lasting legacy while 53 percent intend to pass their business on to the next generation.
The study asked business owners to identify the most important step necessary to successfully pass along their business. Respondents said mentoring and training, choosing the right leadership, generating interest, motivating the next generation to take over and developing a succession plan.
More than half of the businesses surveyed (51 percent) have not developed a succession plan. Of those who anticipate selling their business instead of passing it on, 60 percent plan to sell to someone outside the company. And about 28 percent have a buy-sell agreement in place.
Key findings:
Respondents were asked: which best describes your plan for succession?
• Written succession plan: 14 percent
• Well-defined, non-written succession plan: 19 percent
• Succession is incorporated in estate plan: 16 percent
• Succession has not been planned yet: 51 percent
While most businesses report that family and nonfamily employees are treated equally, a “considerable number” acknowledge the rules are different for family and nonfamily workers in some key areas:
• Bonus pay: 27 percent
• Compensation: 25 percent
• Termination: 22 percent
• Hiring: 18 percent
• Performance evaluations: 17 percent
• Promotions: 16 percent
The report also found that half of all family businesses (49 percent) admit they don’t use market reports, labor statistics, the internet or other outside sources to determine approximate salaries for their workers.
“These results paint a management backdrop that could fuel discord between and among family and nonfamily members, leading to potential legal exposure for family businesses,” according to the report. “And they shed light on areas where better education and clearly defined, documented human resources policies are needed.”
The report found that most respondents are first-generation (45 percent) or second-generation (32 percent) family companies, though some have been in business well over a century.
The CBIA is Connecticut’s largest business organization with 10,000 member companies.
