The Art of Letting Go: Why First Generation Family Business Owners Avoid Leadership TransitionMay 22, 2015
It takes a special kind of person to start their own business – even more when the future of the entire family may depend upon it. The personal financial investment alone can be daunting. In addition, there may be no profit at all for the first couple years. Unbelievable sacrifice is required along with a never ending list of hats to be worn. A combination of confidence, imagination, perseverance and the ability to work the hours of two to three full-time jobs to make this family business a success is often required.
You can do everything right, and still not make it to the second generation in your family business. But for the 30% or so who do, you now face other issues. After bringing life to something heretofore non-existent, nurturing it to become strong and healthy, how do you let go when it is time for the next generation to take over?
There are many steps necessary to prepare for a transition to the second generation. You will want to maximize the value of the business for growth; prepare your employees, vendors and clients for the change; and set up a formal succession plan. Your plan should be thorough, keep all stakeholders in mind, and be communicated to the primary affected parties far in advance of the actual transition to ensure your successor wants and is prepared to be the next leader. Many of these steps hint at the personal, emotional aspects of this change, but its importance cannot be understated.
So while you are working on your formal succession plan (ideally years before you are considering retirement), take a look at the other factors that may hold you back from a successful transition:
You do not want to retire – ever. You have worked perhaps since you were a teenager. Making this family business the biggest part of your life for decades can set you up for a huge loss when it is time to hand over the reins. Going from 70+ hours a week to zero would be a tough adjustment for most anyone. The retirement let-down happens to many who spent their lives so industriously, even for those not leading a family business.
First, try to come up with some activities you have always wanted to do, but could not because your business obligations always came first. While you are still running the firm, why not explore other capacities you can serve in the future. You could become the Chairman of the Board of Directors, or work in just one area of the business that you most enjoy (e.g., in an architectural firm, you can still design without having to run the day-to-day operations).
You do not have confidence in your successor. If you are selecting your child as the successor because you want the company to stay in the family – but in your gut you believe your child is only taking the position to please you, or to have access to money and/or power without knowledge of or interest in the business – you will likely have trouble letting go. This may be your instinct, and it may be correct. You know how much you put into the business to get it to this point. If your experience leads you to think the transition will not work, it probably will not.
In fact, you do not think that anyone could ever replace you. You are probably right here also, at least in that you had to start the firm from scratch and grow the business in your own way. Having to know how every aspect of how the business functions while actually working can be the toughest education ever, and uniquely tailored to your wants, needs and skills. As long as you think the next generation must do things the same way you did, you will not be happy with the results. As someone who was always the leader, it can be humbling to think anyone else could do the job as well as you.
Remember that your successor is starting at a very different point in the business lifecycle, an established firm with most systems already in place, a client list, and a workforce that already knows the business. Your successor is not, in fact, doing your job; they are in a new role requiring perhaps other skills, other objectives. Letting go of your ego and your distinct way of doing things can make acceptance easier. There are perhaps parts of your mission and how you conduct business that are of great importance to you and the continuation of the family business. These are the ideals you can teach the second generation and include in your succession plan. The objectives may be the same, but the methods may not. And who knows, maybe the second generation will come up with even better ideas!
You have not shared your fears or concerns with anyone. As well as your children may know you, and know how you act and react to things, they are still not mind readers. How can they address your concerns about leadership transition if they do not know what they are? Including others in the dialogue and being communicative about your expectations from the start can help prevent disappointment on both ends.
After the time to let go has been set, you are still holding on. When the time to let go has come, you are still keeping a tight grip and refusing to hand the reins over. Do not sell the horse then, once the money has been exchanged, show the new owner the reins and refuse to hand them over. You must have enough faith that you set up a good plan into place and let it come to fruition. Yes, there will be bumps and, in fact, the business may not make it. But that could be for any number of reasons. You need to give it as good of a chance as it can get. Then let your baby ride that “two-wheeler” for the first time. That is the time-tested way that they learn.
Just as avoiding seeing the doctor will not keep you from being sick, avoiding a succession / transition plan for your family business will not mean that the need for a transition will not come. You can have this happen after you unexpectedly fall ill or worse, or you can be as thoughtful and diligent in making a proper plan as you were in starting the business in the first place. Since having control is so much of what your role in the business was initially, why not exit leadership in a way that is also the beneficiary of your skills and experience? That could be the makings for a true legacy.
Contact me at email@example.com or 732.747.0500 with questions about starting a transition / succession plan, or to receive a complimentary consultation with our family business advisors.