Industry Market Trends
How to Successfully Transition the Family Business
January 29, 2014
One thing that's constantly in the mind of a family business owner is succession planning. The transition of the family business to the next generation can be seamless and smooth. However it takes education, planning, openness, and humility.Education
For the succeeding generation, learning the business requires its own education process. That education is often not found in the halls of schools, but in the halls of the business, working with customers and walking hand-in-hand with employees. Part of this process is learning what it means to make payroll, pay taxes, determine the impacts of discounting, and generate new revenue.
This education is the foundation of value for transitioning the business to sons and daughters, nephews and nieces. It involves the next generation proving themselves, showing vision, seizing opportunities, and learning the business from top to bottom. It involves, at a minimum, a season. What a season is, depends on the business.
Seasons for businesses can span multiple years. Economic seasons can be seven- to 10-year cycles of harsh economic conditions, times of new growth opportunities, periods of high growth, and times of retrenchment of the business. The season will allow a full extent of education, through which the experience gained can be the difference between the succeeding generation's future prosperity and failure.
PlanningThe best way to ensure a smooth transition is to make a detailed plan. Talk about everything -- everything. There will be touchy subjects that don't want to be dealt with, but talk about them anyway. Create a plan that allows you to roll out of the company. Here is the reality: One of these days you will leave. It might be a year from now or a decade from now. Don't leave a mess for your next generation, with them not knowing what to do. Make your business legacy live on - and not live on in chaos. If you want help in how to do that planning, call on your team of advisers. Openness As the transition plan works its way in, be willing to accept new ways of doing business, new products, a new management style. Not everything new is good, yet not all old is perfect. The next generation of leadership must make their own mistakes, but be there to guide them and keep them from falling off the cliff. As much as possible, do away with the prejudices of the next generation -- about what they can and cannot do. Get rid of family politics. Stop protecting Junior and doing things for him. Let him stand on his own two feet and even leave the business; there is no shame in not being in the family business. Just because it is your passion doesn't mean you have to force it on him. Here is the message to give to Junior: Understand that you will change. If you have a passion for medicine, follow that passion for medicine. Still, while you may not want to be in the business now, your passions, needs, desires, and interests will change with age. Realize that Mom and Dad, Grandpa -- even Aunt Mary -- may have had the better perspective, as you gain experience. Never burn your bridges and be unable to come back. Humility It takes patience and the art of learning how to step back and let others accomplish tasks in new ways. The second-generation owners of a family business told me the story of their dad. He had started to transition out of the business. He was very organized and had a place for everything. The son, the new business owner and leader, did not inherit that gift of organization, and had piles on his desk. Dad, on a few occasions during the transition, went through and "cleaned up" the piles, throwing out what he believed was unnecessary papers. As you can imagine, that created tension and frustration for both father and son. New rules had to be set. There were new ways of doing things. They weren't better - just different - and Dad had to step back. He needed to realize he was no longer in control and had to be humble, understand the new ways, and allow the new regime to succeed while making mistakes on their own. Timing the Transition Transition timing can be very stressful. How long will it take to move out of the business? It seldom happens overnight (unless by death or divorce). Yet the multiyear transition can be enough to kill the business, relationships, or both. The challenges include: Customers. Do customers still want to work with Dad, since he gives them a long-term customer discount that Junior won't? Do they like the way Mom runs the business and always ask to deal with her, making it hard to establish a level of leadership? Boundaries. So who really is in charge? Daughter? Mom? Dad? All of the above? Who makes the decisions during the transition period? Create a plan that lays out the transition. Is this a six-month, 12-month, or two-year plan? You may have to revise the plan at some point. Do not just go with the flow. It might work out, but there is a great chance that it won't. Hoping things will go well doesn't work. Hoping no one will get their feelings hurt is wishful thinking, because it will happen. Not making a plan puts you on a path to having issues. "But we have always done it this way." That statement has been heard around the world, in businesses of all sizes. Family business owners do not have the corner on this market. It does take on a new twist when changes need to take place to keep up with the times, the skills of the next generation, or just market changes. One of my favorite books is If It Ain't Broke, Break It by Robert Kriegel and Louis Patler. Their concept was to examine conventional business wisdom and break its rules in order to gain a competitive advantage. This book was written in the '90s, but much of the concept still applies today. When something is working, you need to analyze why it is working and what can be done to improve how it is working. In other words, what can be done to make things work better? Football for many years was solely a running game. Even after the forward pass was legalized, the sport remained a running game until a coach decided to have his team try throwing the ball. Everyone was shocked and critical. Yet today, football is very much a passing game; just look at what quarterbacks get paid. Photo credit: Ambro at FreeDigitalPhotos.net Janna Hoiberg is a seasoned and credentialed coach highly respected by her business-owner and executive clients interested in leadership development, business growth, and corporate executive coaching. She has the ability to translate the skills, knowledge, and expertise - acquired through 30 years of managing and operating successful businesses - into strategies that effectively make a difference in sales, marketing, management, team building, time allocation, and more. As an author, keynote speaker, and workshop facilitator, Janna shares her real-life experiences from her past and from within the business world. Her latest book, The Family Business: How to be in Business with People you Love, Without Hating Them, represents her 30 years of working in and coaching family businesses. Janna can be reached email@example.com or (719) 358-6936.