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Succession of family and management in the family business

In Family Business Succession Planning Guides and comments on October 16, 2011 at 12:08 am

I was speaking with a client today about why his succession has worked.  He has been running his company for over 50 years and had rightly identified a number of years ago that he would not be here forever.  What did he do?

At the time of his self reflection, he realized that he was everything to the company with his sheer willpower and strength of character.  Sound familiar?  Well, he proceeded on two fronts.

1. He improved his family’s knowledge about the business. At first, he invited them to the annual general meetings and then discussed with them the outcome of the regular board meetings.  Soon the family business became a regular topic of conversation, often initiated by the continuous questions from the children, at the family dinner table.

2. On the non-family management side, the business had evolved into two distinct divisions which could operate independently.  He made plans to then divide the business into two and then groom the leaders for each of those businesses, who would one day operate the business for the family.

Forward thinking and taking a leap into the unknown.  That is what it took for this family succession to succeed.

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Communicate with confidentiality

In Family Business Succession Planning Guides and comments on October 12, 2011 at 12:32 am

Communication within families can be charged with emotion well beyond the words that are shared.  Having said that, fruitful and effective communication is essential to create an environment for your succession plan to proceed and succeed.

In discussions with others, we are often told things that should not be shared.

Confidentiality.  It is a challenge to keep and difficult at times to maintain.

In a family, the dynamics of the intrafamily communciation can turn confidential information from being a shield into a sword.  What do I mean by this?  By sharing such information between family members, say with other siblings, the siblings could use this information against the other sibling.

What can you do to make productive these delicate intrafamily discussions?

1. set ground rules of family communication, both your expectations of openness and honesty as well as family matters should stay within the family

2. lead by example and do not interpose yourself in a family squabble which does not directly involve you

3. make time and effort for communication (the proverbial Sunday family dinner)

In a later post, I will go over my inspiration and thoughts on a book titled “Fierce Conversations”.

Learn, think, apply!

$ 3 trillion dollars

In Family Business Succession Planning Guides and comments on October 8, 2011 at 12:46 am

This may be a controversial blog post.  However, something has to be said and we can begin to effect change, one child and one family at a time.

This is the amount of intergenerational wealth transfer that is estimated to transfer in North America in the next 30 years.  Two concerns about this impending situation come to mind:  a generation of entitlement is being bred and what can you do about this in your specific family.  I strongly believe that each of us has the ability to control our own environment.

Your family.  That is your world over which you can control how they think and react to your success.  You have worked so responsibly and diligently in building your family business. Somehow, you have to help your children understand and more importantly appreciate the advantages that the business has brought to your family.  Also, they need to know that the business is something that will one day be theirs and understand that hard work that it took to accomplish your family’s success.

Often, many children of family businesses only see the two components of your business:  your extraordinary hard work from long hours and the wealth that they are (having the privilege of) enjoying.  And not see all of the hard work that goes into building and operating your family business.

Entitlement. In order to have a successful succession, your children must begin to appreciate what they have and not take it for granted.  This may not be an easy task, depending on how you have raised your children.  You have to think about how you will raise the topic and start with baby steps.  The best thing to do is …. Start the process.

Good luck.

Learn, think, apply!