Strong families make for strong companies. Industrial Machine and Engineering Co. is one such company. Dan Conner founded the metal fabricating business in 1982 in Monett, Mo. Today the business has grown to include (from left) son-in-law Eric Merriman, daughter Rebecca Merriman, wife Charlotte Conner, Dan, and son Mark Conner. All are involved in the family business. Image provided by IMEC

Speaking with Don Gahagan, president of McDougall Processing, Nashville, Tenn., about the transition his company has made from focusing heavily on industrial and architectural work to more precision sheet metal work, he mentioned how important this new path was for the family-owned company. He referenced how the new business direction would give the third generation of the McDougall family “a fighting chance for the future.”

There is a very definitive belief in the metal fabricating industry that a select few family-owned companies make it to the third generation of company ownership.

What if I told you that’s not necessarily the case?

In the story “Do Most Family Businesses Really Fail by the Third Generation?” in the July 2021 Harvard Business Review, authors Josh Baron and Rob Lachenauer, business consultants with expertise in family-owned companies, took a critical look at the belief that family-owned firms are excluded from the possibility of long-term success. In particular, they called into question the 1980s study of Illinois manufacturing companies that is likely the source of this idea.

That study looked to see just how long family companies lasted. To establish a framework for the study, the researchers took their target group of companies and placed them in respective generational blocs (with each bloc representing 30 years or about one generation). When doing this, only 30% of the businesses made it through the second generation of ownership. (The wording in that last sentence is key. That 30% represented companies that existed for 60 years!) Only 13% reached that third generation of ownership.

The authors of the article also noted the study of Illinois companies didn’t offer other types of companies as a reference point. Baron and Lachenauer pointed out that public companies often are short-lived; one study of 25,000 publicly traded companies from 1950 to 2009 showed a 15-year average lifespan, and Boston Consulting Group research for 2015 suggested almost a third of public companies would falter over the next five years. Whether family owned or otherwise, running a business is hard work.

The duo made the case that family businesses actually might have advantages over other types of companies:

So the next time you hear about a family-owned metal fabricating company celebrating a significant anniversary, remember that it’s likely around because of the family ties, not in spite of them.

The FABRICATOR is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1970.

See More by Dan Davis

Dan Davis is editor-in-chief of The FABRICATOR, the industry's most widely circulated metal fabricating and forming magazine, and its sister publications, STAMPING Journal, The Tube & Pipe Journal, and The Welder. He has been with the publications since April 2002.

Find The FABRICATOR on Facebook

Find The FABRICATOR on Twitter

Easily access valuable industry resources now with full access to the digital edition of The FABRICATOR.

Easily access valuable industry resources now with full access to the digital edition of The WELDER.

Easily access valuable industry resources now with full access to the digital edition of The Tube & Pipe Journal.

Enjoy full access to the digital edition of STAMPING Journal, which serves the metal stamping market with the latest technology advancements, best practices, and industry news.

Easily access valuable industry resources now with full access to the digital edition of The Fabricator en Español.

© 2022 FMA Communications, Inc. All rights reserved.

Not yet registered? Sign up