To lose one potential successor may be regarded as a misfortune, to lose two looks like carelessness. When Lachlan Murdoch walked out of his father’sNews Corporation at the end of July he was following in the footsteps of his older sister, Elisabeth, who also chose to go her own way back in 2000.

But before indulging in any ignoble feelings of schadenfreude, business leaders should take note. The Murdochs will not be the last dynasty to witness turbulence round the Sunday lunch table. Theirs is a classic dilemma experienced by many family-run businesses. “What is the greatest challenge facing a family firm?” asks Nigel Nicholson, professor of organisational behaviour at London Business School. “Family.”

“Family businesses work best when there is structure and process in place,” says Peter Leach, chief executive of the BDO Stoy Hayward Centre for Family Business. “You have got to get the governance model right and manage people’s expectations carefully. The key issues here are competency, legitimacy, trust and maintaining open communication.” But clearly, when only around 15 per cent of family businesses survive intact beyond the third generation, meeting this challenge seems a daunting task.

“The father and son relationship can be particularly problematic,” says Prof Nicholson. “You sometimes have a situation where the ‘old stag’ is locking horns with the ‘young stag’, and that is not healthy. The senior party is still trying to prove his capabilities as a man, while the younger guy tries to show he is a worthy successor. A bit of that edge may be okay, but too much machismo is not really helpful. This is a transitional relationship that has to be managed carefully.

“You need to have a coaching or developmental relationship with the next generation of leaders and that can be a hard thing for a father to do.” Prof Nicholson adds: “It might be wiser to arrange for a future boss to sit at somebody else’s feet and learn at another ­business. If you are grooming a successor, you have to give them a real sniff of power.”

Mr Leach also points to the importance of culture: “If your children are bright, they won’t put up with nonsense for very long. They will fight back and eventually leave. So aA key question for all these businesses is: what are the family values? These values will transcend many ­generations.In the case of Rupert Murdoch, what are the family values there? That business is really being run on a corporate basis, not as a family business.”

But family businesses need not be the scene of constant anguish and infighting – they have several valuable qualities. After all, in the long term, non-family businesses do not display any greater longevity.

“Any business that lasts more than 50 years is rare,” says John Ward, professor of family business at IMD in Lausanne, “and these firms do not face the added complications of family involvement, so you could argue that family businesses must contain advantages.”

Prof Ward adds: “Because of their long-term orientation, family firms are able to pursue unconventional or contrarian strategies. They have a more durable culture and a much more human set of values, rather than the functional values of an ordinary ­corporation.” The visibility of family members – ‘cultural ambassadors’ – is another strength.”

New research carried out by IMD into the world’s 1,000 largest publicly traded companies suggests that family businesses are generating returns on capital that are 30 per cent higher than those of non-family businesses.

John Davis, faculty chair at Harvard Business School’s “Families in Business” programme, is equally bullish about the prospects for performance of family firms. “The majority of publicly traded companies are family-controlled,” he says. “Even a third of the Fortune 500 are still effectively under family control.”

“The big advantage family businesses have is stability,” he says. “The owners aren’t going away. This gives management more room to operate: they can think patiently but act aggressively.” Employees are loyal not just to a firm but to a family, with strong and clearly understood values. There was a time when firms were nervous of calling themselves a ‘family business’, but that’s been changing over the past decade or so. Family companies are coming of the closet. They perform better,” Davis says.

Still, the popular image of families at war whether in the boardroom or at the family ranch, pertains, partly because of the folk memory of television shows such as Dallas, in which the patriarch Jock Ewing caused untold strife by setting up his sons in opposition to one another, challenging them to earn the right to succeed him.It all ended messily, with eldest son JR Ewing being shot by a (for a time) mystery assailant.

In reality, too, family businesses can suffer from profound management problems. “It really can go wrong when a patriarchal boss singles out one family member as a successor,” Mr Leach says. “In a non-dysfunctional family, the father might say: ‘You sort this out between you, come to an agreement you are all happy with, and I will bless whatever that decision is.’ ”

Not allowing ego to get in the way is a crucial part of keeping the family business going. “It’s a question of knowing what is right for the business and not just for the family,” Mr Leach says. “Is this business a birthright or is it an opportunity?”

Families need to recognise the difference between ownership and day-to-day control. Take the Cargill family, owners of the food and agriculture group that is the world’s largest private business. In the early 1960s the family’s third generation had to determine the future of the business. It was a significant player, with sales of around $2bn (£1.1bn), but had the potential for much bigger growth.

The family met and took two big decisions: to remain a private business in perpetuity, and to make sure that its leadership structure was a true meritocracy. The family members then resigned and appointed Whitney ­MacMillan as chief ­executive, removing themselves from the day-to-day management of the business. Today, Cargill has revenues of around $50bn and employs more than 10 times as many people as it did 40 years ago.

Clarity of structure and succession plans are also vital. “There is this phrase – ‘One day, son, all this will be yours’ – well, what does that mean?” asks Mr Leach. “It could mean anything.

“I know one family where the father wrote this phrase out again and again in a 12-page letter to his son, but when he came to retire he expected his son to buy the business from him. The son was appalled, but I asked the father about it and he said that he had simply been keeping his options open. ‘Did he think I was a charity?’ was his response.”

“All happy families are more or less alike,” wrote Tolstoy in the opening lines of Anna Karenina, “but each unhappy family is unhappy in its own way.” This may hold for family businesses as well.

“It is probably unwise to force the issue in a family business,” says Prof Nicholson.

“I’ve seen people swear they would never get in-volved in the family business and then suddenly join in, and I’ve seen people being groomed for ages who finally turn round and say ‘To hell with it!’. You have to stay flexible and open, let children develop and do what they want to do – they will anyway.”

Perhaps Rupert Murdoch has learnt this lesson in the past few weeks.

While Lachlan was previously described as “first among equals” in the family business, the chairman’s more guarded comments in response to his son’s departure were these: “There is no dispute. All my children will be treated equally and I look forward to the day when Lachlan wants to return to News Corporation.”

As a successful newspaper proprietor, at least Murdoch senior can select from a wide array of problem-page agony aunts should he feel it necessary to seek out further advice.

AMICABLE COUSINS WHO UNITE TO RULE IN THE BOARDROOM

Since 1876 the Warburton family has been delivering daily bread to its customers: first in Bolton, the Lancashire mill town in the north-west of England that is the family’s home, then all around the North, into the Midlands, Scotland, and today almost all over the UK. The fifth generation of the family, all cousins, is now in charge: chairman Jonathan, managing director Brett, and Ross, formerly finance director, who remains on the board as a non-executive. Bolton is still the site of Warburton’s headquarters.

How has the family avoided the turmoil that besets so many other family-run firms? “We’re just not very good at falling out with each other,” says Brett. “The family has been very supportive, and as the results have continued to be good there has been no reason for us not to get along. We all share a great sense of pride in what we do, but we don’t get hung up about our job titles. We’ve learnt that being able to agree and get along isn’t necessarily a sign of weakness.”

The figures tend to back up his view: turnover is “slightly north of £300m ($538m)”, Mr Warburton says, and the company has 3,600 employees.

The family enjoys being a private company, allowing for more time to plan expansion and not having to cut corners in search of instant payback on investments. “As my cousin Ross says – and he should know, because he was one – we don’t have to talk to spotty analysts in the City,” Mr Warburton says.

Neither Jonathan nor Brett was allowed by their parents to work straight away for Warburton, both being encouraged to learn about business elsewhere first. The fifth generation faces a similar situation with their own children.

“We can’t guarantee that our children will want to go into the business,” Mr Warburton says. “I’ve explained that it is in their interests as shareholders that the firm should have the best management possible. Ownership and management are not the same thing, even though we will remain a family business.”

NEXT GENERATION

To manage succession between family members needs tact and an objective assessment of the best move for the company across several areas.

■ Training. Too much machismo can poison family relationships and upset the younger generation’s development. One solution is for successors to cut their teeth outside their parent’s direct control.

■ Family values. Remember that family links can be a strength, allowing a board to pursue contrarian strategies.

■ Be meritocratic. A chief executive from outside the family may be better qualified to run the business: family members must know when to step back.