Are you the “Pip” in your family owned business? As Charles Dickens described in his story, "Great Expectations," Pip was used and abused, although he was honest and hard working and had a good heart and good intentions. How will you deal with the challenge of your generation taking over and running the family business? What are your great expectations?
Dad started the business from scratch and poured 40 years of his life into building it and making it viable. Now he’s looking forward to handing the business over to his kids and enjoying the retirement he has worked so hard for. Dad has “great expectations” that the next generation will step in and take over the business. The next generation also has “great expectations” for taking the business forward. (Or do they?) The question is, are both generations in agreement about how to move forward? Do they have an understanding about when and how this handoff will happen? Is there clear agreement on the timing of the transfer of roles and responsibilities? And who needs to get out of whose way, and when? Is everyone confident that there will be no sabotage from family (and non-family) who are functioning as the transition support team?
Ever visit the typical 2nd or 3rd generation independent food service distributor? The one where Dad “just can’t let go” and hangs around to keep an eye on things long after Junior has taken the reins of the company? A company where Dad is the invisible hand behind the puppet President? Where Junior is constantly looking over his shoulder, wondering if he’s doing “what Dad would want me to do?” Where decisions are made by consensus, rather than based on financial analyses and clearly identified strategic plans for business growth?
Any successful generation-to-generation business handoff requires forward planning and a detailed succession-planning checklist well in advance of any actual handover of responsibility.
Here are a few of the key actions that need to be planned for well in advance of their execution:
1. When Dad retires, he needs not only to get out of the way, but to get out of the business entirely. Management, operations, finances—everything! This is probably one of the biggest obstacles preventing any family-owned business from making a successful transition. Advance planning for Dad (and Mom) should ensure they have a sound financial retirement plan that allows them to have the independence and freedom to “get the hell out of the way,” and not have to worry about how (or if) the income from the business will provide for them in their retirement years. How many small businesses actually do this?
2. Identification of whomever is to be the heir apparent to take over the business from Dad, and commitment from that person. This serves two purposes: it lets everyone in the organization know well in advance who is going to be the next leader of the business, and it allows the successor time to learn the intricacies of the business, which will be required at the “C” level position he will ascend into.
3. A clear and concise time table for handing over roles and responsibilities from Dad to Junior. This allows all within the organization to be informed of what is going to happen and when, and enables them to assess the impact on both the organization and themselves.
4. Identification of a robust staff and support team that is fully competent, loyal, and functional from the moment Junior takes over the reins. Junior may pick his own team, or some of Dad’s team may fill key roles bridging the generational transition if Junior is comfortable with that. These team members need to be identified well in advance in order to avoid any conflict or surprises at the time of transition.
While there are many more details and considerations that apply here, the list above is critical to ensuring a successful generation-to-generation handoff of the leadership role in any family-owned small business. Too many family-owned businesses view the business as a family piggy bank, a cash cow that will provide all things to all in the family. The reality is that only those family-owned businesses that truly see themselves as businesses, and plan and function as true businesses, will survive to grow and prosper through generational transitions.
How will your great expectations mesh with reality when the time comes?