It’s the role of the current heads of family businesses to develop future family leadership, equity owners and business management that will enable their businesses to survive and thrive through generations to come. Without their leadership it will be impossible for their businesses to avoid becoming an example of the statistic that says that most family business fail by their third generation.
It is possible to be a leader in a family business and not wear the mantle of CEO. At times this is preferable.
The architect of succession in a family business has to be the incumbent, the current head of the business. It won’t work any other way.
- Well educated and with a great living standard. Working in the family business. Making a living from the company’s profits; living from the income generated by the previous generation. The firm operates on automatic pilot; nothing is new since the founder created it.
- Don’t work in the family business or have no interest in it, but live from the firm’s profits. A firm with this successor mentality is poised for a slow process of decay. It is trapped in a vicious cycle based on an extractive model of wealth–a sure breeding ground for future family conflicts. It is difficult to break out from this specific firm/family-dynamic routine. However, there’s a possibility in the near future that one of the grandchildren may breath new life into the firm with breakthrough ideas and enthusiasm for taking risks and seizing opportunities.
Harsh perspectives? Perhaps, but true and all too common.
- You have succeeded to the leadership of an enterprising family. Each generation has managed to re-create the company, re-invent it. Each has changed the direction of the company, opening up new and different terrain. Each has discovered and taken advantage of opportunities while using the resources, abilities and know-how from previous generations. The entrepreneurial genetic code of the firm is its hallmark. Each successor has challenged the status quo that sprang from the success of the previous generations, setting a fresh course with new leadership, new goals and new ambitions.
If yours is not an enterprising family, make the commitment to change the situation.
Hearing “I need to …, ” I wonder if the speaker means “I want to,” or if they are speaking in terms of a life-necessary action as in stating “I need to eat.”
The problem is that “I need to” is often based in the unrecognized interests of another, or of all of society, at the expense of our own. In this context it presents a weak, non-committal position that belies our actual goal. It often acts as a screen to hide the fact that we actually don’t want the expressed outcome. A client, expressing something he had been “needing to” for a long time, after considering the source of the felt need came to the realization that he never “wanted to.”
For me, the statement “I need to give my son or daughter more autonomy in the business,” begs the question “why do you need to?” What is the outcome you want? Is it to satisfy a subtle society pressure, or do you see a benefit for yourself, your children, or the business in doing so?
Clarity is a powerful facilitator for reaching goals. If you really don’t want to do something, you are wasting your time and that of others by pursuing it. The hard part about life is that this happens, without our quite realizing it, and it sometimes takes harsh medicine to break the momentum and turn us around.
If you have been voicing “need” to turn over responsibilities in your business to your children while not doing it, you are lying to yourself.
Most family businesses succumb to either being sold to non-family entities, or to closing their doors with the third generation. While this may be lamented, it is, at times, the best strategy for stewarding wealth across generations.
Preparing next-generation minds for leadership and innovation is a critical role of family business. Accomplishing these goals and yet selling the business, is a win.
Two critical areas for success of a family business are mission and margin. They provide the fulcrum for long-term and short-term term goals, both integral to a family business.
Together, they are the balancing point between a family-first business–one that offers employment to all family members, and a business-first business–one that operates for the primary purpose of providing a return on investment.
‘Mission’ describes the core ingredients that define your family and family business–your fundamental reason for being. ‘Margin’ recognizes it is a requirement to be profitable–for your family, your customers, employees and suppliers–and to sustain fulfillment of your mission.
I often hear it said with conviction that the reason entrepreneur-founders of family businesses don’t turn over the business to the next generation or even institute a process for succession is because they can’t give up control.
Certainly this occurs in some situations, but it is inaccurate to apply this characterization as a general rule. Other factors may be at play. The founder may have no plans for a life after relinquishing the role in the family business, or may not have built a life outside the business. It is also possible that the founder has not adequately educated business stakeholders, such as key employees, clients, suppliers and colleagues about the transition, and consequently is concerned about the potential repercussions.
All family businesses are unique; and it is important to understand the dynamics of each individually before reaching conclusions and recommending approaches to support them.
Transitioning from one generation to the next is one of the biggest challenges in family businesses. I liken it to changing canoes in a middle of a lake. While there can be different issues at play, sometimes the challenge is that the parent can’t let go because of a felt loss of identity giving up the role they have had.
Rather than a sense of loss, Richard Rohr (https://cac.org/richard-rohr) believes letting go is the source of a renewed peace of mind. As long as you think you’ve got to fix everything, control everything, solve all the problems, explain everything, and understand everything you will never be at peace.
Unique to family businesses is that the dance of life is at hand. Simple in thought, though recognizably more difficult to achieve, your identification with the pattern of life of next generation going forth from the vantage point of having ridden on your shoulders is the beginning of letting go and peace.
Transitions in family businesses happen whether we plan for it or not. Unlike Armand Hammer who, when asked of his plans about the transition of the leadership of his firm, stated “If I die the board will decide,” we all encounter that day where we tire, get bored, or are perceived as hanging on longer than we should.
Succession does not mean giving up on life but more so, if we allow it, an acknowledging of life cycles and a grabbing on to life in a way that creates a legacy.
The architect of a family legacy and transition in the business can only be the current leadership, not their children. The head of the family must set the stage and initiate the conversations that create the legacy.