Much has been written about succession in family businesses, and it has even become the topic of a recent television drama. There are also many real-life stories that demonstrate the potential for drama and conflict in a family business.
A very public clash played out in New England not long ago when a longtime feud between cousins — one a board member and the other the CEO — who controlled Market Basket, a grocery chain based in Tewksbury, Massachusetts, came to a head. As the two publicly wrestled for control, employees and customers staged protests, and the chain lost $583 million in sales. One cousin ended up buying the other out, but only after a long legal battle, the loss of millions of dollars and unflattering media coverage that irrevocably damaged family relationships.
Why is succession such a difficult challenge to tackle? No one will dispute that getting succession wrong can have a devastating impact on the family and the business. Although a significant percentage of family business leaders indicate that having a transition plan is critically important to the success of their business, only 18% of family businesses actually have a written plan. Why is this the case?
Transitioning a family business is one of the most complex issues a family-controlled enterprise will face because it requires transitioning at three levels: personal, professional and business.
Each of these transitions has its own set of challenges. Across a range of succession stories, many family business leaders have indicated that they don’t know where to begin. The prospect is so overwhelming that they simply push things off to the future. After all, there is a business to run.
In over 30 years of advising family businesses, my firm has never had a client who suggested that they started the succession process too early. Nevertheless, almost everyone puts it off as long as they can.
On the personal level, quite often you have devoted your entire adult life to successfully running the business and keeping the peace among the family. This takes an intense commitment and can become all-consuming. It may seem almost impossible to think about what you would do if you didn't run the business, and your sense of self-worth may be completely tied to the role.
Planning for succession requires you to face your own mortality. And you may wonder how you will be viewed by family, colleagues and friends once you're no longer the CEO.
For many, succession planning feels likes writing the last chapter of their life’s novel. For others, there is incredible joy in turning over the reins and moving on to what’s next. It has been my experience that leaders who look at succession as the culmination of their current career and the launch to their next not only do a better job in leading succession planning for the business and family, but are excited to start their next chapter.
It typically begins with thinking through all the things that you are good at and enjoy doing. View this not as a loss, but a transition to a wonderful new opportunity. Map out what this looks like and how you prepare for it, and make it a reality. Many leaders are uncomfortable with spending time and energy on themselves, but this is the time to do so.
Next, think about the professional level. Analyzing the attributes and competencies of the new leader is not an easy task. It’s human nature to be attracted to people with similar qualities to ourselves. It may be difficult to consider the changing landscape the business faces and identify what attributes the next leader will need to be successful. For the incumbent, their professional and social circles often become intertwined, and it is difficult to imagine not continuing in these circles in the same way. Leaders often commit to a succession plan on paper only to sabotage it in reality by never really leaving the role.
One of our clients who supposedly turned over the reins of the business to his son still came into the office daily, met with key personnel and provided his opinion regularly. For employees, customers and especially his son, it was as if the transition had never occurred. This only led to a complete (and unjustified) lack of confidence in the son and family discourse.
How can one prevent this chaos? Define the role, if any, of the retiring leader within the organization moving forward. At best, this should be at the board level or as an advisor, but only when asked by the new leader. Leave the day-to-day operations to them. Seek assistance in defining their attributes and competencies, recognizing they may look very different than the previous leadership.
Finally, there are the business interests to consider. Succession planning represents a great opportunity for the business and the family to think long and hard about the future. How does the family view the business: as an asset to be monetized, or as a long-term critical component of their family legacy? Think strategically about the future of the business and what it will take to be successful from a leadership perspective. Use this unique moment in time to open the lines of communication among family members as well as other leaders and employees. Recognize that, as much as succession planning can be a fantastic opportunity to look ahead, others need to be involved and their opinions considered, and communication needs to flow freely and often.
Succession can be a scary time for all, and participating in the process allows others to feel more confident in the future, whether they agree with the decisions or not. The most important thing is simply to get underway sooner rather than later. Think of succession planning as a step toward aligning your own desires and those of the family with the future needs of the business.
