For many years, family-owned businesses have taken pride in passing leadership from one generation to the next. This tradition has been seen as a sign of stability, strong values, and long-term success.
However, that approach is being tested in today’s fast-changing business world. One example is Follett, a major supplier of college textbooks in the United States. The company had been led by the Follett family for nearly 100 years. Recently, it made the difficult choice to sell its main businesses to private investors. This meant giving up family control in order to help the company survive and grow.
Follett’s story shows that holding on to tradition can sometimes come at a high cost. More family-run companies are starting to question whether keeping leadership in the family is still the best way to succeed.
Founded in 1873, the Follett businesses were early adopters of computing technology, using automation to streamline operations and gain a competitive edge in education markets. Over the years, Follett Corporation made strategic acquisitions to enter new sectors and acquire technologies it would further develop and integrate into its offerings. Despite its forward-thinking operations, the company could not outrun the long-term pressures of succession and scale. The Follett Corporation divested all three of its major operational businesses which continues to operate under different ownership, entirely separate from the Follett family for the first time in generations.
“Keeping a business in the family doesn’t guarantee the founder’s legacy, it can actually put it at risk,” Ankit Shrivastava said, Founder & Managing Partner of Enventure, a private investment firm. “Follett is an excellent example, which supplied nearly half of America’s college course materials; after more than a century of family leadership, it ultimately sold to private investors to secure its future”
Shrivastava points to broader trends emerging across American enterprise. In a landscape where market demands shift rapidly and competition intensifies, relying on familial succession has become increasingly precarious. According to industry data, nearly one-third of family businesses admit to employing individuals solely based on their last name, regardless of their qualifications.
“Inheriting a name does not equal inheriting the capability to lead,” Shrivastava said. “The cost of getting it wrong can be devastating, not just financially but culturally as well.”
Given these challenges, a key question arises: how can we prevent corporations like the Follett Corporation from “moving out of the family”?
The solution is to follow a clear plan based on a few important steps:
- Succession Planning: To ensure continuity, families should begin preparing the next generation early by involving them in meaningful roles and responsibilities. Succession must be approached as a long-term, structured process with clear expectations for both ownership and operational leadership.
- Family Governance Structures: Creating formal structures such as a family council, a shared agreement on values and responsibilities, and holding regular meetings helps keep everyone informed, aligned, and focused on common goals. This promotes unity and reduces the risk of conflict over major decisions.
- Professional Management and Family Oversight: Families can bring in professional managers to handle daily operations while remaining involved at the board or ownership level. This approach allows the business to stay strong and well-managed while the family continues to guide its values and long-term direction.
- Financial Alignment: It’s important to offer options like internal buyouts, build strong cash reserves, and reduce reliance on outside investors or debt. Families should also prepare for tax obligations that may come with generational transfers, which can otherwise force a sale.
- Legacy Building: Families can build a connection by sharing the company’s history, values, and impact, and by creating opportunities like scholarships or charitable initiatives tied to the business. Celebrating the family’s role and purpose beyond just profits helps keep the legacy alive.
While the story of Follett shows how hard it can be to hold onto family control, it also reminds us that with the right steps, family businesses can build a future that honors their past and adapts to today’s changing world.
