When it is time to address succession in a family business, there are many considerations that need careful attention. Most family business owners will naturally look to the next generation for the successor. This hand-off is not a decision that should be assumed by either generation. For the sake of the business and all the stakeholders involved, both generations need to put a lot of thought into the future leader.
The incumbent generation needs to think beyond family ties when evaluating the best successor. And the next generation needs to think beyond family expectations when evaluating if he or she is the right person to fill the leadership role. As with any pivotal decision in a family business, this is a highly emotional decision due to the family dynamics. For that reason, you will need to have great wisdom and potentially an outside advisor to guide these discussions.
Questions for the Incumbent Generation and the Next Generation
Before we dive into the heart of the matter, let me say on the onset that succession discussions should not be put off because of their sensitive nature. The earlier you start these discussions, the better it will be for everyone involved. My own succession into the family business is part of a ten-year plan that is still ongoing. It is a timeline I thoroughly endorse and recommend.
Now that you are thinking proactively, I want the questions and advice below to guide this sensitive process. Taking these questions to heart could save a lot of turmoil.
Let’s start with the incumbent generation. What questions should the current business leader be asking related to finding a successor?
- Is there a relative that is in a good position to succeed me?
- How much executive development, if any, have we provided to the next generation?
- Can I confidently release authority to someone in the next generation?
- Is there a relative that exhibits the right character, culture, chemistry and competency that aligns with what the organization needs?
- Is there a relative that is eager to learn and willing to be groomed into the position?
- Is there a relative that is a good age to run the organization for a long time?
The most impactful thing my dad repeatedly said to me throughout our succession process is, “I can replace a business partner but I can’t replace my son.” This wisdom needs to be heard by all incumbents. You can’t replace your relative – whether it is a son, daughter, grandchild, nephew, niece etc. – so guard those relationships. However, there are many incredible individuals that can competently run your business. Don’t sacrifice a family relationship on the altar of family succession.
Questions for the Next Generation
Now let’s turn our attention to the next generation. What questions should the younger generation be asking to ensure the family business is right for their future?
- Do I want to be a business owner?
- Do I know what is involved in running a business?
- Do I have the desire to learn what I need to learn to be a successor?
- Do I have the support of other family members – inside and outside the organization?
- Do I have the right mentor or executive coach?
- What professional development am I proactively seeking to be the best leader I can be?
- What dreams will I need to forgo if I take this opportunity?
- Am I ready to accept the family disappointment that may come if I say no to this opportunity?
The best advice I have for the incoming generation is to seriously consider if stepping into the family business is your best future. You may have people expecting you to eagerly jump at the opportunity to take on the leadership. Those expectations may have become your own, albeit subconscious, expectations. It is time to think seriously about what you are committing to and if that future is the one that will bring you the greatest satisfaction.
I shared this concern in another blog article (one that Star Wars fans will especially enjoy):
“Many family business leaders never accept their own beliefs and dreams but lead the life they feel others want them to lead. Unfortunately, the next generation forgets to be who they are. Many family business executives are not living their legacy but the legacy and expectations they have cast over them. Over time this mindset and belief will lead to regret and unhappiness.”
If you come to the decision that the family business is not the right future for you, you may have a tough conversation ahead of you. When you meet with the incumbent leader, be sure to approach this delicate topic with appreciation and respect. Yes, there may be contention over your decision, but at the end of the day, if you know this is not where you want to be, you need to remove yourself – for the good of business, the family and yourself.
Smart Considerations for Family Succession
A good friend and CEO of a family business, Jonathan Theders, recently shared his career journey on the Talent Magnet Institute™ podcast. His organization, RiskSOURCE Clark-Theders, has implemented a policy that helps family members get experience elsewhere, before committing to the family business. Family members are required to have a job outside the family business for 5 years and gain a promotion during this time before working at RiskSOURCE. This allows those individuals to get an outside perspective and really apply themselves in a different organization.
The reality is, succession is a monumental decision for everyone involved. I suggest involving an outside partner to help you assess the best choice for your organization. There are assessments that can be taken, serious topics that need to be discussed, and thorough planning that needs to be outlined. This is a huge undertaking, made even bigger when family dynamics are involved.
We can help equip you with the right tools and connect you to the right people to ensure your succession is a positive experience. You can start by reading these articles and listening to these podcasts. Then set up an appointment to discuss what we can do to help. 888-366-3760.