Beyond the business
This issue's cover story subjects are different from the families usually profiled in Family Business. While we generally feature families who own an operating company, the Power family no longer are the owners of J.D. Power and Associates, the highly respected consumer survey business founded by patriarch Dave Power in 1968.
After the sale of J.D. Power to McGraw-Hill in 2005, Power family members formalized their family governance, formed a family limited partnership and began working with a multifamily office on investing as a family and educating the next generation. The Powers continue to work together on philanthropic activities, as well; they established a family foundation in 2005.
The Powers are using the proceeds from the sale of their business to generate new wealth and fund their foundation. They are working collaboratively as a family. Sounds like an American success story, right?
Of course it does—except that J.D. Power and Associates can be considered as one of the 87% of U.S. family businesses that did not survive into the third generation, according to frequently cited statistics compiled by family business researcher John L. Ward way back in 1987. Reliance on those statistics fails to take into account the fact that families like the Powers—and around the world there are many, many others like them—do not fit into a simplistic "survival or failure" binary.
A three-year global study of 118 family firm executives conducted under the auspices of the Family Firm Institute and completed in 2010 found that over their history, the participating families had owned an average of 6.1 companies and spun off an average of 1.5. I wrote about this study in the 2011 edition of Family Business Agenda. (The study was eventually published in the June 2012 issue of Family Business Review, an academic journal.)
The study, as I wrote in 2011, "aimed to reframe the view of family enterprise from a focus on operating companies to an assessment of value creation over time." The researchers concluded that the family, not the business, is the key wealth creation vehicle.
Of course, some family firms file for bankruptcy. Others are sold because the family owners are unable to compete in the market. Still others don't last because the family quarrels over how the business should be run.
Family business educators must teach the public that there is another end of the continuum—sales of a business that do not represent a family's failure, but rather are part of its transition to a new kind of family enterprise.
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