It’s a Family Affair – Mastering the Trials of Family Business Succession

It’s a Family Affair – Mastering the Trials of Family Business Succession

Our theme for today is eternal, a concern shared by tradesmen and kings.

You expand and enrichen your realm, landed or commercial, then the time comes to lay down your crown of leadership.

If you are wise, a clear line of succession, through crown prince or princess (fine names for your fortunate firstborn), those fated next-in-line children of yours, has already been established.

Succession planning in a family business is tricky. Sly Stone and his family had a smooth song about it (‘It’s a Family Affair’, 1971), and the lyrics tell all:

‘One child grows up to be
Somebody that just loves to learn
And another child grows up to be
Somebody you’d just love to burn’

This is a serious affair: not all children are created equal. The eldest might be what my New England cousins call a ‘chowdahead’, while the smartest of the bunch simply might not be interested in the family firm.

They say nowadays, enterprising young women and men want to be Steve Jobs – a visionary maverick, working in a sexy new industry that turns messy, garage-bound bums (oh, that was Bill Gates) into overnight billionaires. Managing the family cannery or funeral home chain – no matter how enriching – may leave them dry.

There is a sure way to discover which child most fits the bill to take over the business: start grooming them early. You’ll need a well-reasoned plan; yet studies of my acquaintance suggest that across the developed world, 40% of family-run companies lack a succession plan. How can kids succeed when they haven’t even warmed up? It’s like expecting Junior to try out for the Celtics, without teaching him to dribble or shoot.

Alas, I’m speaking again about my dear, departed father. Dad was a sportsman until his tennis court heart attack at age 74. His record at Watertown High in the 1930s reads like, I hate to admit, the basis for fictional lowlife Al Bundy. Dad went both ways, no helmet, on the football team; no, he didn’t catch the joke. Point guard at basketball. Third base in the spring. At age 30, eyes too dodgy to play with the company baseball team any longer, he switched to tennis, self-taught. He was a menace on the court.

Here, to our point: he once tried to teach me to play. No actual instruction was involved.

“OK, Tommy, this is how you serve.” Bang! – went his wood Slazenger cannon. I swear, the ball hissed as it blurred past my plump 13-year-old-knees. “Why didn’t you hit it?”

Then the basketball thing. Dad’s impossible dream… alas, pops was too cheap to pave our backyard court. Woe: you can’t dribble on sand, and I didn’t develop my jumper until I cribbed Robert Parish in the 1980s – too late! Daddy-o never said I’d let him down – I was first in the family with a master’s degree and Greeks like such things. Don’t you dare scoff.

We’ll never know if I could have been master of Boston Garden. There was no detailed plan to groom me for the slot. I must tell you plain – it was a relief. The life of sporting exertion, all perspiration and gasping lungs, isn’t for me. Family business owners, take note. Junior may have other plans.

If you want the kids to excel at something useful, like running a business that employs hundreds of workers and enriches the family for generations, you must teach them well, hard, and early.

Here’s a good hint: don’t name a primary successor among your children at first. Families today must be meritocracies. The children should be given equal opportunities to learn, prove their mettle, and reveal if they’re interested and capable in the first place.

First step in the journey: take the kids to work. Show them what mom and dad do; let them sort mail, run deliveries, peek over your shoulder. They say every winning company has its secrets, the insights and spark of the founder that made it a going concern. This kind of magic can be passed down, but only by experiencing it live. So, drag the kids away from the TV and gaming console and get them into the office.

Next up, consider their early career development. Some kids may yearn to work for the family firm through college summers and into their first professional days. Others will rebel; encourage and enable them. They may forge an entirely independent career, and that’s just fine. Let your kids be.

Or – they may find the impersonal working world less appealing than rowing in tandem with kith and kin. Prodigal offspring should be welcomed back eagerly, beyond reasons of family piety: they may have picked up a few tricks of their own, valuable to the collective concern. You may even encourage children to pursue extra-family careers with an eye to bringing them back in their 30s or 40s, when the parents are aging and eyeing retirement.

Here we meet a crucial concern: the big step-down. Industry insiders have a term to describe the commonest way to create a family business crisis: it’s called “succession by heart attack.” Like dad on the court, but with millions at stake.

I know that sounded cold, but when the founder drops dead, it is shockingly common how often they pass on without leaving a will and succession plan. I have written extensively on this pitfall: take a look at the hair-raising For Want of a Will – Prince’s Chaotic Legacy to get hip.

Experience teaches a simple truth: planning the well-ordered stepdown of a company’s founders and leaders is tough, because as a rule, they don’t want to do it. Yet it is essential to get ready for retirement if you want the family concern to continue in prosperous mode for future generations.

The process is complex and personal, but simple conceptually: I will retire by a certain age. The helm will pass to whichever of my children or close kin shows the greatest competence and interest. If no one fits the bill, I will sell to the highest bidder, share out the proceeds as an early inheritance, and take mom and dad’s cut – the tenderest bit – and travel to Wimbledon each year for the tournament.

Easier said than done? It sure is, and for this reason, our world is full of business planning service professionals. They can help from the moment Prince or Princess is born, and that’s just when the grooming should start – at first, adults only. As old Al – my father’s name, trouble me not with Bundies – used to say in his mordant 1930s humor: “Don’t ever pressure youngsters until they’re old enough to feel it.”

That’s the deal. Family business owners, heads up: if you want to ensure a successful transition one day, the first one who needs guidance is you.

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