Manage Family Business Succession To Reduce Its Sting

by Mike McGrann, Executive Director, The S. Dale High Center for Family Business



Choosing a successor can be hard
on siblings.

Did you know that family-owned businesses are responsible for 60 percent of total employment in the United States? Here’s a chilling statistic from the Mass Mutual Family Business Survey 2007: 

Fifty-five percent of CEO’s set to retire in five years have not yet chosen a successor.

If family businesses constitute the backbone of the

American economy, why are nearly half of their executives compromising future viability by failing to put a succession plan in place?

Succession is a tough nut.

Leadership succession is hard for everyone. According to a recent article in Newsweek, large publicly traded firms struggle with succession. It’s an inherently difficult process. Add to that process all the family dynamics that have given family businesses a negative connotation, especially in the U.S, per that same Newsweek article. Throw in a host of family business leaders who equate succession with death because they have nothing to transition to once they are “out” of the business because they failed to acknowledge their own departures, and it's no wonder succession is easier to avoid than tackle head on.

For the successor generation the succession process can be painful, too. It can feel as though the child chosen to succeed the outgoing leader has won the prize whereas all other children in contention have lost. Who wants to create that kind of conflict and tension within the family?

How to manage family business succession.

The good news is that succession can be managed with a good process that is neither magical nor difficult to understand. One of the things family businesses can do is empower a board that includes a few directors outside the family business to help manage the development of new talent and choose a successor. The final decision can be based on requirements that have identified the most qualified successor to lead the business (as opposed to perceived favoritism), which will minimize family pain.

If you are five years out from your retirement, there is still time to roll out a healthy succession plan. The longer you wait, however, the more you limit your ability to develop a talent pool of successors.

Mike McGrann

Mike’s Bottom Line: Succession doesn’t have to be all gloom and doom. It can be managed if executives can get their head around two things—plan for business leaders to transition up and not out; and follow a proven process of using a board to help manage succession.

'Hurrah for spectrum of leadership transition issues addressed!'

Phil Clemens, Tony Martin, Matt Diller, and Dana Chryst

Our Leadership Transition panel shared a range of experiences and perspectives during our breakfast seminar on January 20.   "Hurrah for spectrum of issue provided," said one evaluator. "This provided a variety of 'real thoughts' to identify with and test," another said.

During the course of the two-and-a-half hour presentation, many stories and anecdotes were shared--and as another commenter said, no two stories were the same. Here are just four observances of our panelists:



Tony Martin
Martin's Famous Pastry Shoppe, Inc.

 "[When you work in family business], there will always by those who feel that family members got the job because they have the right last name. I feel I must work harder and better because of my last name."

--Tony Martin

Dana Chryst
The Jay Group

"Relative to family members working in the business, the key is treating everyone consistently. If a family member has a performance issue, they should be treated the same as anyone else."

--Dana Chryst

Matt Diller
Pre-cast Concrete Systems

"How do you get young people to want to be in the business and be empowered? My parents never told me to come back. I knew they wanted me to, but they allowed me freedom to go away. Don't force your children into the family business."

--Matt Diller

Phil Clemens
Hatfield Quality Meats

"What do you want your legacy to be? If you don't let the next generation take over and make this a legacy business, it dies with you."



--Phil Clemens

The complete presentation will be available on The Network of Family Business website soon. 



Partnering with the Network of Family Businesses

by Gale Martin, Director of Marketing, S. Dale High Center for Family Business

A longtime professional associate of the S. Dale High Center and friend to family businesses, Dr. Steven K. Moyer has created an exclusive online network connecting family business owners that premiered earlier this year. The Network of Family Business (NOFB) was developed to meet family business owners' limited time and schedules, allowing them to stay on top of trends while building their family legacies.

This partnership gives our members access to their content--online seminars and educational resources--a complimentary service that meshes well with our face-to-face seminars, intimate forums, and other programming.

A few weeks ago, I sampled one of NOFB's virtual learning seminars conducted by family business expert, Dr. Steve McClure called "Critical Issues for Succession Planning in the Family Business." Dr. McClure's slides were illuminating and chock full of content.

Here are just some of the key learnings of interest to family businesses I gained from this seminar:

Is this what your leadership transition looks like?

Key Learning: Succession needs to be managed.


The handoff of a family business is always a source of conflict and is rarely effectively paced, usually happening too fast or not fast enough. Without proper planning, the typical succession scenario can devolve into two buffalo butting heads, ramping up rivalries between the successor and the generation that's stepping down, all of which is highly injurious to stakeholder confidence.


Key Learning: Leadership Transitions should take longer and be more deliberate.
Handing off a business really isn't like passing a baton because we expect that transition to be instantaneous. Handoff needs to be a gradual and progressive transition. A more realistic model regarding leadership transition is needed. Sometimes it can be a 15-year process and will have ups and downs during that time, requiring continual adjustment. Typically, the more that the junior generation says things like, "When are you leaving, Dad?" the more Dad digs in his heels.

Key Learning: Both generations have to make an effort; both contribute to the success of the leadership transition.

One thing that is needed is a different point of view from the successor generation. The successor needs to examine how he or she can be an effective leader in their generation. Focus on learning how to deal and work with the outgoing senior executive. At the same time, the outgoing generation would be wise to consider that letting go of the business doesn't mean leaving. Executives who are most successful at leadership transitions are those who focus not on leaving but on going on to something else.



Key Learning: Put successors to work
on a common task.

 In preparing for a leadership transition, why not give the successor generation a task to complete? Dr. McClure advised putting siblings and cousins together and require them to complete an important task. Also, senior executives may need to provide mentors for those who'll be leading the company in the future. Executive coaches are becoming popular. Forums (like the affinity groups offered by the S. Dale High Center) can be extremely effective in growing the next generation of business leaders.

Those were just a few of the valuable learning points from NOFB's October seminar. For the rest of the presentation, NOFB makes archived versions available--just one of the benefits of the S. Dale High Center's new partnership with the Network of Family Businesses.