Why 40% of New Executives Fail in Family Businesses (And How to Prevent It)
- Bill Stranberg
- May 6
- 4 min read
This is the story of a CEO who nearly lost his job just three months after being hired. It happened to a client, and it perfectly illustrates why so many new executives fail in a family business succession process.
The Warehouse That Almost Cost a Family Business CEO His Job
A commercial real estate company, founded about 60 years ago, had reached a critical transition point. The 85-year-old founder – still the 100% shareholder – needed to retire. His children weren’t viable leaders, so bringing in a non-family president/CEO was his only option.
The new CEO arrived, reviewed the books, and quickly spotted a problem. The company owned a warehouse that was:
Sitting empty with no tenants
In significant disrepair
Incurring substantial property taxes
Located in a gentrifying neighborhood (so at least appreciating in value)
From a business perspective, selling seemed obvious. So the CEO put it on the market.
And nearly lost his job because of it.
Why? That warehouse was where the founder had started his business 60 years earlier. He kept it for sentimental reasons, not financial ones. He didn't care that it was losing money – it was part of his legacy.
This disconnect occurs frequently in family-owned companies. The new executive makes what appears to be a sound business decision, only to discover they've crossed an invisible line that wasn't in any job description.
Why Traditional Onboarding Fails in Family Business Succession
Every new hire wants to prove they were the right choice. For executives coming from non-family environments, this typically follows the familiar 30-60-90 day plan:
First 30 days: Learning systems, setting up benefits, meeting key people
Days 30-60: Understanding operations and culture, building relationships
Days 60-90: Implementing changes, running at full speed
This approach – standard in most corporate environments – routinely fails in family businesses.
The pace is too fast. The cultural dynamics are too complex. And most importantly, family companies rarely provide a structure to channel a new executive's desire to demonstrate value.
Without clear guidance, executives default to what worked in their previous roles. They make business decisions without understanding the unique values, history, and priorities that truly drive the company. In the case of our warehouse example, a purely financial decision crashed into an emotional family value.
A Better Family Business Succession Approach: One-Year Integration
At Stranberg, we've found that successful executive integration in family businesses requires a full year, not 90 days. It involves completely rethinking how new leaders build credibility and trust within family systems.
Here's our framework:
1. Establish a first-year vision tied to two elements:
Business KPIs that measure operational success
Demonstrating the values of the ownership family
2. Create measurable metrics for both areas:
Business metrics are straightforward (revenue, profit margins, etc.)
Trust-building metrics might include:
Employee feedback surveys
Number of relationship-building meetings conducted
Stakeholder interviews and satisfaction
3. Link variable compensation to both sets of metrics:
Variable incentives shouldn't just reward business performance
They should equally reward behaviors that align with family values and relationship-building
When you tie financial rewards to both performance and values alignment, you create powerful incentives for new executives to operate in ways that work for your family company's unique culture.
Here's What Makes This Family Business Succession Approach Work
Most family companies have compensation structures that look similar to non-family businesses. They pay for performance based on financial outcomes. While this works well in non-family companies, it can drive the wrong behaviors in a family context.
When the CEO in our warehouse example put that property up for sale, he was acting in line with what his compensation plan rewarded – financial performance. Had his variable incentives included measures tied to preserving the founder's legacy or maintaining emotional connections to company history, he likely would have approached the situation differently.
By explicitly tying compensation to the behaviors you value – not just the financial outcomes you seek – you create clarity about what matters. You also dramatically reduce the likelihood that your new executive will make the same kind of misstep our warehouse CEO did.
This Isn't Just Theory – It Works
We implemented this approach with a manufacturing client who had cycled through three COOs in five years. Each time, the new executive would alienate long-tenured employees by moving too quickly to implement "best practices" from their previous companies.
By establishing a one-year integration plan with metrics tied to both business performance and relationship-building, their fourth COO succeeded where the others failed. He intentionally slowed down, invested time in understanding the company's history and values, and built trust before pushing major changes.
Four years later, he's still there – and the company has achieved record growth under his leadership.
The Bottom Line
The standard approach to executive onboarding simply doesn't work in family companies. The pace is wrong, the focus is too narrow, and it fails to account for the complex human dynamics that differentiate family businesses from other companies.
By extending the timeline to a year and deliberately structuring how new executives demonstrate value, you can dramatically improve your odds of finding and keeping the right leadership.
At Stranberg, we help families with executive integration every day. If you'd like to learn more about how to prevent your next executive hire from becoming part of the 40% who fail in their first year, visit our website or reach out directly. We can help you build an integration plan that works for your specific situation.
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