I recently read a couple of articles titled: “Your Family Business Won’t Survive If You Don’t Plan for Leadership Transition” and “When Not to Keep It In the Family” that I would recommend to anyone seeking insights into how business owners went through the process of letting go and handing over control of their business to whomever was going to carry it on when the founder retired or reduced their day–to–day involvement.
Intuitively, as the patriarch or matriarch of a family business, one would think that passing control of the business to the next generation of leaders would be something to aspire to. The business, after all, is the legacy they’ve built and something they would want to endure and thrive. So, handing over the reins of power should be a natural progression, right?
It’s not always easy to let go
The reality though, is that many business owners find the process of letting go difficult. There can be many reasons those who started a business struggle with passing it on to someone else – from being too emotionally attached to the business and, thus, psychologically unprepared to step down.
Another example appears in the first article referenced above where, Terry, the patriarch had developed such strong control–oriented instincts through his three decades of leading his firm, that he found it exceedingly difficult to allow others to make decisions without exerting some control.
I have also encountered other cases, where fear of retiring and losing the power, status and respect that comes with being a business owner were the big roadblocks. Another major obstacle is not planning for “life after work” so that the founder doesn’t know what they will do with their time, once they walk away from the structured business they’ve become accustomed to over the years.
For some, running the business is often the most meaningful part of their life, so , stepping down just doesn’t seem to be an option. However, by remaining a part of the business – though not at the helm – their mere presence can stifle their successors – leading to frustration of a successor who does not want to live in the shadow of the founder forever. .
Handing over control is not an event, it’s a process
Kevin is another example of business owner who knew it was everyone’s long–term best interest for him to initiate his eventual transition from the family business. What he didn’t recognize was that letting go of control takes time. It’s not an event, but rather a process. Though there is no set time frame, successful transitions can reasonably take three to five years or more of planning.
The good news was that Kevin was in the habit of holding family meetings to update family members on the progress of their business. This provided the perfect setting to begin the discussion of his eventual retirement. Unfortunately, Kevin was extremely reluctant to put the subject of succession planning on the meeting agenda for several reasons.
First, although the business was successful, it was relatively small and closely held among family members. There was no formal corporate governance structure in place to ensure that succession became a priority discussion at family meetings. Combined with Kevin’s inability to emotionally share control of the business he built over several decades, succession planning was an easy subject for him to put off or avoid altogether.
Kevin also felt handcuffed by what he perceived as the unavailability of a successor among family members in whom he had confidence about their commitment and ability to ensure the ongoing vitality of the firm.
Finally, Kevin anticipated there would be disruptive sibling rivalry among his three children if he chose one of them as his successor, unless he could somehow provide the others with comparable opportunities.
Fortunately, Kevin engaged us to lead a discussion on the issue in his family meetings over the next year, during which time, we were able to construct an exit plan that met everyone’s needs and expectations.
Why you must let go
Despite the challenges and subtleties of letting go, it is in the best interest of the business and its owners to identify and mould a successor long before you decide to give up control. However, the effort is can be easily postponed if you are so busy running your business that you don’t stop to think of identifying a successor, much less taking time to nurture and train one. But we must acknowledge that it takes time and effort to transfer the knowledge, skills and experience you acquired over many years to someone else who would be responsible for the successful continuation of your family business.
It will, therefore, be extremely useful if your successor works alongside you for an appropriate period to learn the nuances of the business. During this transition phase, you should be willing to give them increasing levels of responsibility, accompanied by decision–making authority, to help them (and you) feel comfortable as they take on a leadership role. Your experience and intuition will tell you when your successor is fit and ready to takeover. By then, you should be preparing to move on.
During the transition period, be prepared to deal with the challenges and potential frustrations of working with a next–generation successor. There are bound to be occasional personality clashes and variances of opinions on how things should be done. Your successor might want to introduce new methods and fresh ideas which might ruffle you. Recognize that these differences can be outcomes of the generation gap or the emergence of new business best practices about how things should be done.
Obviously, you want your successor to succeed. After all, they will be the custodians of your legacy. To ensure that happens, you must maintain open communication and be respectful of your successor’s ideas and methods. Of course, if their suggestions or actions are outright unjustifiable, you should retain the right to step in.
While you would have chosen your successor because of his/her capabilities and commitment to the success of the business, at the end of the day they will be will remain answerable to the family – which includes you.
Letting go may be hard to do, but it is the natural progression in the life of your business. Done well, it will lead to deeper relationships among family members and confidence in the next generation of business leaders.
In the end, letting go is natural progression that should lead to deeper relationships and further trust of next generation business leaders.