It might seem like the perfect arrangement: being the child of someone who operates a family business…so your career path is just about determined at birth. Indeed, there are some plusses: you have plenty of time to get to know the business, you don’t have to worry about the competitive landscape of interviewing and you probably feel you have job security.
However, those plusses also have a minus side: you might have no interest in joining the business, you might not be qualified to take on the role you’re given and you might feel stuck in a position that doesn’t fulfill you. Even more challenges come to light when the issue of succession comes into play, and that’s what I’ll focus on today.
Family businesses that have smooth transitions have three things in common:
When even one of those elements is missing, problems can ensue, but as you’ll see below, it’s possible to incorporate all three into a successful transition plan. Let’s review three business transition scenarios:
- One owner passing the business to involved siblings. This situation will go smoothly if the siblings have defined roles and responsibilities, and all pull their weight. It’s important that no one has an “entitlement attitude”; all siblings must hold themselves accountable and share the same passion and commitment to moving the business forward.
- Partners or siblings passing the business to involved kids. This situation can be problematic in the best of cases, but it’s especially tricky when the partners have different numbers of kids, i.e., one has just one and the other has two. The prudent way to handle this is to open the lines of communication as early as possible, and if necessary, enlist the services of a professional who can objectively view the situation and provide guidance based on what’s best for the business. Being proactive is a must.
- Dividing an estate that includes a family business between kids that do and don’t work in it. What’s critical here is to have a plan. For instance, it might make sense to gift the business to the kids who are involved in it, but gift other important assets—a building, home, cash—to the kids who aren’t involved.
What these scenarios all have in common is that a succession plan is in place. What can happen when that’s not the case?
- Feelings of frustration, anger and/or hopelessness about the future
- Power struggles among siblings and between parents and children
- Increased and pervasive tension in the business
- Deteriorated family relationships
- The business fails due to any or all of the above
I’ve already noted the “fix”: employing communication and accountability as part of succession planning. Above all else, siblings must have clear expectations of their roles, responsibilities and future opportunities, and protocols must be in place for decision-making and conflict resolution. When everyone is on the same page, the future of the family business can be very bright.