Why Family Businesses Lose Control

When the patriarch of a third-generation media company* died suddenly, the family believed the business was secure. The patriarch had built a fledgling operation started by his father into one of the largest privately-held newspaper empires in the country. Revenues were strong. A $1 billion valuation was within reach. His five adult children, all talented in their own fields but lacking closeness after a lifetime of competing for their father’s affection, joined the board determined to protect what he had created.

But within three years, the family felt forced to sell the business for a fraction of its former worth.

On the surface, the family made the painful decision to sell because their industry was in turmoil as traditional print publications gave way to online media. The company wasn’t succeeding at this transition, and the family wanted to get out while the company was still worth something. The siblings decided a sale was the best path forward.

We saw something different. As we began working closely with the owners to decide whether to continue holding onto the business or to sell, we realized that they had been effectively losing control of their family business for years. During the patriarch’s lifetime, he failed to meaningfully engage the next generation in any capacity or to establish any real succession plan beyond creating a trust to divide up the shares. After his death, the next generation owned the company on paper, but they felt they had no choice but to relinquish decision-making to the professional managers running the business.

Without alignment on what they wanted from the business as owners, the experience to challenge management, or independent directors to anchor governance, the family saw its authority weaken. By the time they understood how much control they had ceded, the business was seemingly failing, and they felt they had no choice but to sell. The buyer? The same management team under whom the business had struggled, conveniently driving a bargain sale price.

To the owners, the decision to sell felt like a combination of bad luck and a difficult market. From our perspective, it looked painfully predictable.

In our experience advising hundreds of family businesses, we’ve found that they rarely lose control because of a single catastrophic event. Instead, they lose control when they don’t prepare owners for a generational transition.

Three Common Causes of Losing Control

When a family loses control of their business, the question typically becomes: Who’s to blame? In particular, the current or rising generation is criticized for being the ones that brought a majestic business to its knees, as outsiders believed in the case of the family we just described. But in reality, the deck was stacked against the next generation as a result of a mixture of lack of preparation, impossible expectations, and unsupportive inner circles.

The common thread through these mistakes is that the senior generation (along with their independent directors and advisors) spends enormous energy preparing future business leaders while spending far too little focused on another essential role—that of future owner.

Here are the most common ways we see family business owners lose control:

• The Figurehead Trap: Ownership becomes passive.
• The Rivalry Trap: When roles unexpectedly flip.
• The Distance Trap: Always kept an arms length away.

How to Prevent Unintended Loss of Control

Ensuring that the owners of a family enterprise don’t slowly lose control requires making some long-term investments. Here are a few ways to course correct if you find yourself falling into these common traps:

• Develop an owner mentality.
• Pay attention to family dynamics.
• Ensure that future owners stay connected to the enterprise.
• Ask yourselves: Are we (still) the right owners for our enterprise?

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*Identifying details have been disguised.

Originally published on HBR.org, 11 August 2026.