Succession:  Is it time?

Succession planning it’s the perfect time for the family and other shareholders to evaluate the new mission, vision as well as the family and business values.

By: MARC A. SILVERMAN

 

When does the family business need to start thinking about succession?  How can the entrepreneur know when is the right moment to pass on leadership?  How does one know if the children possess the necessary competence, if there are serious flaws in their personalities and if they may harm the family business?

Victor has been working in the business since he graduated in Business Administration 25 years ago.  He is diligent, but does not have much entrepreneurial talents, which has been a blessing since for that reason there has not been many conflicts between father and son.  His father is 72 years old, and is still the boss.  He is thinking about retiring at a given moment, however is afraid his son lacks the necessary skills to manage the company.

Hugo, Víctor’s brother, has also worked for 20 years in the business. He is more dynamic and has more of a business sense, but his difficult character made two managers resigned.  The father has spoken with his son about the possibility of learning “people skills”.   Although Hugo recognizes that he has a difficult character, in essence he believes that it is a logic consequence of other people’s stupidity.

The business is the fruit of passion, endless hours of hard work and luck.  But  lately there had been very little innovation.  Profits have diminished.  The management team is competent although not marvelous.  At the moment the business has sustained itself but has not grown. 

Hugo is thinking of resigning. “ Why should I spend all my life working so hard? Dad rejects my ideas.  The market now is more competitive.  I have proposed various changes but in the long run Dad always rejects them.  My brother agrees with me:  either Dad let’s us manage the company or we will both resign.

The father says he loves his sons, but that they show entrepreneurial immaturity.  He mentioned suggestions given by Hugo that, if they were to be implemented, they may had caused millions of losses.  The oldest, a better administrator then his brother, avoids conflicts, a trait that, according to the father, could destroy the business.  The patriarch thinks that the key of long lasting success is his general wisdom.  He says: “I have delegated a lot to them, when they demonstrate that they can, I will delegate more”.

It’s pretty late for this company to plan for succession.  The next generation is getting tired and don’t see their own need to learn in order to be successful entrepreneurs.  The father wants to continue controlling and at the same time is blinded to his own flaws.  He governs indulgently, with out pressing upon the preparation of the next generation and with out a real plan for succession.

To find the right moment is difficult, since there are many factors to have in mind, such as trusts of banks and investors, identifying competition for leadership, the personal needs of the founders, and the motivational needs of the next generation.  A clear plan allows each individual to choose rationally the best way of participating and determining the abilities to reduce conflicts.

There are no objective valuation among family members, but that does not mean that the family members have no idea about it, only that they can not remove their biased opinions.  No successor is perfect, and he will not dedicate himself on only realizing the founder’s dreams.  Almost all the professional executives are conscious of their limits and try to truly correct them.  However, if these flaws lead to betray the trust then the candidate is not the one. 

Succession times give the perfect occasion for the family and other shareholders to evaluate a new mission, vision and the values of those the family and the business.  Smart family businesses often take advantage of the moment to build a solid base of love and trust among the family, as well as the competence and necessary professionalism within the business for the long term success of all. 

Marc A. Silverman, PhD, Marc@strategicinitiatives.net