When should the family business begin planning for succession? How can the entrepreneur know when the right time is to turn over the reins of leadership? How can he tell if his children possess the competencies they will need to continue the organization’s success? What should he do if he believes serious flaws in his children’s character will destroy the family enterprise?
Juan began working in his family’s business for 25 years ago after receiving his MBA. He is a diligent and hard worker but without a lot of entrepreneurial talent. This was a blessing in that it reduced many conflicts between father and son. Dad has been able to maintain control while his son has been the chief implementer of them. Dad is 72 and still going strong. He thinks about retiring sometime, at least slowing down but he fears this son just doesn’t have what it takes to run this now quite large enterprise.
Juan’s brother, Pedro, has also been working in the family’s business for 20 years. Juan is more aggressive and more of a businessman. But he has a temper. A number of Managers have complained to the patriarch and two good ones have left. Dad has spoken to his son about learning “people skills” and although Juan acknowledges some difficulty with his temper mostly he believes his temper is a normal consequence of others’ stupidity.
The business was borne out of passion, endless hours of hard work and luck but lately has shown little innovation. Profits have diminished. The management team is competent, although not inspiring. Currently, the business sustains, but is not growing.
Pedro is thinking of quitting. He states “Why should I spend my life working so hard? Dad rejects my ideas for change. Our environment is much more competitive. In the last five years I have initiated several change initiatives which in the end Dad rejected. I’ve spoken to my brother – he agrees with me. Either Dad begins to let us run the company or we both will leave”.
The patriarch stated that he loved his sons but they show quite a bit of business immaturity. He mentioned several projects that Pedro suggested which would have resulted in millions of pesos being foolishly wasted. His oldest son, who is a better administrator then his brother, avoids conflict – a trait the father believes could destroy the business. The patriarch believes that the key to the long-term success of the business is his overall wisdom, and that eventually his sons will gain the expertise they need. He states “I have already delegated enormous amounts of authority; once they prove themselves I’ll step back more.”
This company is already late in planning for succession. The next generation is growing restless and blind to their own learning needs for becoming successful entrepreneurs. Dad likes being in control and is equally blind to his own leadership shortcomings. He rules benevolently, without insisting on the coaching and training the next generation needs. He shows no serious plans to give up the reins.
The right time is difficult because it must take into account so many different factors including: trust factors of banks and investors, identifying leadership competencies, personal ego needs of the founder, as well as motivational needs of the next generation. Making a clear plan early allows for everyone to choose rationally how best to participate and what skills are needed and will reduce conflict.
Objective assessment among family members does not exist. This does not mean that family members are clueless but rather they cannot overcome their biases. Best is to have outside evaluation done by professionals who have no vested interest. No successor is perfect, nor will any successor simply follow the founder’s dream. Most professional executives are well aware of their limitations and take serious steps to correct them. However, if these flaws break trust, then the candidate is not suitable.
Times of succession provide a perfect moment for the family and other shareholders to reassess the mission, vision and values of the family and the business and use this moment to deal compassionately and sensitively with each person’s needs, the family’s development and the company’s. Smart family companies often seize this moment to build a base of love and trust inside the family as well as competence and professionalism inside the business for the long-term benefit of all
Marc@sii-inc.net