Shift power successfully
Guiding a business's transition to the next generation requires clear communication and lots of planning.
Most family business owners know legacy planning is important for the long-term success of their business — but that doesn't mean they take the necessary steps to ensure a smooth transition of power. What I see happen over and over are parents who invite their adult children into the business with the thought of grooming them to take over, but when the time comes, mom and dad won't give up control.
n Realize they're not ready to let go;
n Don't have a vision for what's next for them;
n Are uncomfortable that their children may have a different vision for the business; or
n Have failed to manage expectations and communicate honestly about their concerns and fears.
In addition, parents often fail to differentiate between family and business modes, so they may find it challenging to trust their children to carry their own weight — even though they've grown to be responsible adults.
Unfortunately, in personal relationships, we often get stuck seeing someone through the family “lens” of how we experienced them in the past, rather than acknowledging their growth and abilities.
That's what happened in the following case:
A business owner invited his daughter and son-in-law into the business but didn't trust them, so he micromanaged and often usurped both of their authority. He had an issue with respecting boundaries — he couldn't see past his “little girl,” even though she was a grown woman, and he underestimated the folly of trying to treat his son-in-law like his own child. This story didn't have a happy ending, for the couple ultimately left the business.
I have also observed many parents getting “insulted” when their adult children want to implement changes or perhaps take the business in a different direction. Unfortunately, they perceive these suggestions as not only a lack of respect for what they have accomplished thus far, but a challenge to their ability to continue to add value to the company. While this is usually a misperception of their children's intent, these conversations can leave unresolved and hurt feelings.
Even when everyone involved is committed to a successful transition between generations, unforeseen and unspoken issues such as those mentioned can derail this process, often leading to disastrous damage to family relationships.
A formal family business succession planning process can eliminate situations like this by opening the lines of communication to ensure everyone is on the same page. Expectations must be managed upfront, and parents and children should keep discussing the future, hold each other accountable and engage in honest communication.
Parents must admit their role and start to let go, giving their children more and more responsibility. They must also be able to gracefully listen to any honest feedback they receive from their children, instead of being hurt and defensive.
Some excellent steps to take as part of the legacy planning process include:
• Focusing on increasing lines of communication and conflict resolution;
• Creating a governance structure and hierarchy that clearly outlines areas of responsibility;
• Creating a family mission statement to help guide decision-making;
• Establishing an informal advisory board to help guide the business; and
• Holding monthly family meetings and family management meetings to discuss issues and concerns.
Failing to have a business succession plan is a recipe for disaster, not just when difficulties exist between parents and children, but between siblings as well.
When values don't align, it can lead to a lack of trust, poor communication about essential issues and avoiding discussions about critical decisions, which sadly leads to litigation at times. The legal fights that can ensue when family business succession planning hasn't occurred can tear families apart — certainly not what the parent-owner had in mind for his or her legacy.