The Three-Dimensional Challenge of Succession: Part Three: Bringing it All Together

By September 6, 2016Succession Planning

When family business succession works, it is never due entirely to the older generation — G1 — or the next generation — G2. In every case, it works because both sides came together, made accommodations and helped each to help the family and the business. Given the usual eagerness of G2 to begin implementing their vision, and the understandable caution of G1 about embracing an uncertain future, this is often trickier than it may sound.

Professionalism is the best antidote to succession issues. When family business leaders can put aside fears, ignore past emotional entanglements, resolve squabbles and see clearly their own strengths and weaknesses, succession becomes a readily manageable process.

Ideally, G1 leaders systematically begin long before their own anticipated retirement. They identify potential successors on the basis of ability rather than primogeniture. They groom, train and test candidates in real-world situations inside and outside the company. They make the final decision based on what will be best for the company and the family, even if it means letting go of long-held illusions.

Failing that ideal scenario, everyone is going to have to adapt. G2 candidates may need to accept they can’t get a job in the family business until they are adequately educated and have shown their mettle. A business degree and several years’ worth of promotions working for non-family businesses are typical and fitting requirements.

G1 leaders may have to accept that their chosen candidates are not the best available. The typical example is when the oldest son must be passed over for a younger son, daughter, nephew, niece or grandchild. This happens a lot. Business ability, it turns out, is not infallibly transmitted through genes. The better G1s are at accepting this, the more likely succession will create an optimum outcome.

Obviously, much of this does not come naturally. Perhaps not so obviously, it’s much easier for outsiders experienced in succession to see where the problems lie and to propose workable solutions. Both G1 and G2 need to be receptive to new information.

Often, they need to start by even admitting there is a problem.

In the context of a family business, with its emotional currents and tangled relationships, it’s often best for all if challenging information comes from an outsider. Sometimes that’s the only way realism will ever enter the conversation. Chances of a G2 locked on the leadership prize suggesting that he or she should go back to business school are small. Similarly, few G1s will jump at the opportunity to tell their anointed successors that plans have changed.

By now it may seem that succession is an insurmountable obstacle. Not so. Succession is a challenge, true enough. And it’s not one that many family businesses are really well-prepared to take on. But it’s also a well-trodden path that countless family firms have negotiated without serious misstep. Chances are your family business can do it too. And understanding the different perspectives of the major players can help increase those chances to near certainty.

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