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Family Succession - The Final Challenge.
By Dr. Rick Johnson, CEO Strategist, LLC
Sunday, 13th December 2009
 
How can you turn the business over to your children without creating chaos; this is probably the toughest question any business owner that has family working in the business will ever face.

However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition?  This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of management.

This child has worked outside the business for someone else for a minimum of five years. They have completed their MBA and they worked their way up in your organization starting in operations or customer service. They don't walk around with their silver spoon visible and they don't wear their family title on their sleeve. "Piece of Cake!"

Let's face Reality--- That scenario, although it certainly does exist, is the exception and not the rule. In most cases privately held businesses generally have several family members working in the business. When the president has more than one child in the business, things start to get more complicated. Before we dive into that challenge, "How do we select the next President?"

Let's review a few statistics:
  • Family business is the driving force behind the US economy providing over 50% of our employment
  • 59% of family owned businesses have only 1 or 2 owners
  • 25% of family owned businesses surveyed stated they would seek a non family member CEO for succession
  • Key areas that family owned businesses seek advice and counsel on include:
- Strategic Planning
- Organizational Design
- Operational Effectiveness
- Leadership Development
- Succession Issues
- Compensation
- Sales Effectiveness
- Risk Management
- Assessment

Now, how do you decide on who should be the next President? If you are not one of the lucky few described in the opening scenario and you have multiple family members working in the business, your stress level is already at a high point. First, many if not all family members working in the business have feelings of entitlement to some degree. This is generally true of at least one if not all of the president's kids.

Choosing the next president becomes even more difficult if the children have used their name as a title instead of the actual title of the job function they performed and the position they hold in the company. (This is often unintentional and some kids don't even realize it) This difficulty increases exponentially if none of the kids have demonstrated a high level of competence, respect for all employees, leadership skills that pa ttern the "Lead  Wolf"servant style and at least some promise of potential to fill the president's shoes.

Although the majority of Fathers/Mothers would prefer that their Son or Daughter take over the business and carry on the family legacy, this is not always the best option available. I know it is difficult for any parent to admit that their child may not possess the skill sets necessary to take over as President of the company. However, that situation actually does exist in many family businesses.

What are the options if Junior (or Daughter) isn't ready? --- The first two questions to ask yourself are; "Will Junior ever be ready? --- Does Junior have the ability to learn how to become President?"

As difficult as it is to accept, your answers to these questions alone are not good enough. If you have a Board of Directors, you should solicit their input and recommendations. Hire a consultant to do an assessment of not only Junior but other executives in your organization that may be qualified for the Presidency.

Conduct 360 degree reviews to get input from peers and subordinates. Ask them to complete the Winslow Profile". (This is the personality profile used by the NFL and the Hockey team that beat the Russians in the Olympics) Precisely define the Presidents role and responsibilities and match these requirements to Junior's skill sets. If you don't have a board, create one before the transition. Include the following action items as part of the transition plan:
  • Create a developmental transition training program for the new President. (This should be designed as an internship)
  • Clearly define the former Presidents role after the transition. Will he remain and come into the office? Will he become Chairman of the Board? What responsibilities will the former President retain?
  • Manage the expectations of other family members. Do not allow family tension to create tension in the business. This could lead to employees taking sides.
  • Use your attorney to cover all legal issues
  • Create a real Board of Directors ------ If you want to set up a board or are looking for an outside board member, let CEO Strategist help. 
The Family business can be complex--- The family business structure can be complex and confusing. This is especially true when numerous family members work in the business. The business is composed of interdependent relationships between functions and people that depend on the ability to work toward common objectives.

A family owned business with multiple family members has twice as many opportunities for mistakes, resentments and complacency. Teamwork is essential and effective communication is critical. It is of paramount importance that employees are recognized as the true reason for success. Family issues must not penetrate the business environment.

Holding family business meetings, off site, on a regular basis is highly recommended. These meetings should be used to air feelings, check boundaries and clarify roles and responsibilities as they are being played out. The President must keep his f inger on the pulse of the company culture and environment. Family members must be challenged as issues arise that are detrimental to the long term success of the company.

Some companies create a "Code of Conduct" just for this reason. Regular confidential employee surveys are also a useful tool in this regard. (E-mail rick@ceostrategist.com for a complimentary copy of "A Guide to Leadership Succession in the Family Business")

It's your company, it's your legacy and when all the cards are played it is still ultimately your decision. Listen to your employees, listen to your executive team, get some outside advice and then ----- trust your instincts as a professional business person. Remember, you can always sell the business or bring in an outsider as President.

 Rick Johnson, expert speaker, wholesale distribution's "Leadership Strategist", founder of CEO Strategist, LLC a firm that helps clients create and maintain competitive advantage. Need a speaker for your next event, E-mail rick@ceostrategist.com.  Don't forget to check out the Lead Wolf Series that can help you put more profit into your business.

www.ceostrategist.com
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