Family Business Blog
Mar 01, 2017
Family Succession Planning - An advisers Dilema
The following question was posed on the Mindshop Discussion board by a concerned business consultant. For what it's worth, here's the response I offered.
Question I can think of 6 clients/prospects who are faced with the same issue - the Father (at retirement age or over) will not hand the business over to the Son (who is more capable, probably). Would be great if I could hook up with a family business specialist in the Group who could talk me through how we might approach this.
I foresee this being a major and increasing problem so would be good to develop a robust solution.
My ResponseI agree, you have raised one of the key business issues of our time. If not addressed, much of the hard work of the past half century will go to waste with a consequent impact on employment and the general economy as well as the individual family's wealth and well-being.
Having spent the last 15 years of my working life focused on family business, this is an issue that’s close to my heart. For what it’s worth here are some simple conclusions I've arrived at to start your discussion -
1 There is no one solution that will address all situations.
2 There’s an old marketing saying that people make decisions based on emotion and justify with logic. This certainly applies when it comes to succession planning.
3 From this it follows that you can’t use logic when dealing with the psychologic. From the incumbent’s perspective, their connection to ‘their’ business often goes to the core of who they are.
4 The bottom line is that people ‘do things for their reasons not mine’. All the logic in the world won’t cut the mustard until you’ve identified the real issues, and they make sense from the incumbents perspective.
5 Every incumbent I’ve ever met knows someone who died within 6 months of retirement, ie the alternative we offer them is not an attractive one. What’s more, most dynamic, involved business people enjoy golf/travel as a pastime, but don’t see it as a profession.
6 The incumbent isn’t the only person you have to convince. There is what is known as the ‘succession conspiracy’. Spouses, other children, long term employees and other stakeholders often resist the process as well.
Unfortunately, as most of the business world works on an ‘efficiency paradigm’, the general approach is to work hard on ‘the old bugger’ and convince him or her that it’s time to move on. What’s more we’re surprised (even shocked) when they don’t see the logic in our well-presented argument.
However the natural response to being pushed is to push back even harder and this tends to happen in most cases when using the traditional approach.
I believe the answer is to spend the time to understand what truly motivates the incumbent. Stephen Covey’s ‘seek first to understand, then to be understood’ is a useful approach.
What else do they want to achieve, what will their next purpose be, is there a role in the business that they would like to devote time to (ambassador, product development, historian), is there an abiding passion to do something totally different, do they want to create a legacy that ensures that the decades they have spent building the business lasts beyond their lifetime?
I have no idea what the answer will be, it takes some good questioning skills and a lot of empathic listening to find out. Unfortunately I haven’t been able to refine the process into something that can be sorted out over a quick coffee. It’s more like a good malt or a few bottles of red spread over time.
We also have a role in coaching the successor in how to have these conversations. They will often need to establish a new relationship with their parent. I find that genuine respect for both the person and their past achievements goes a long way. You may also need to work with the other stakeholders mentioned above.
Succession planning is merely a sub-set of strategic planning and I believe that as Mindshop facilitators we are ideally placed to help our clients deal with these issues. But it goes beyond the transactional. It’s a very personal issue, and we ignore that side at our peril.
I foresee this being a major and increasing problem so would be good to develop a robust solution.
My ResponseI agree, you have raised one of the key business issues of our time. If not addressed, much of the hard work of the past half century will go to waste with a consequent impact on employment and the general economy as well as the individual family's wealth and well-being.
Having spent the last 15 years of my working life focused on family business, this is an issue that’s close to my heart. For what it’s worth here are some simple conclusions I've arrived at to start your discussion -
1 There is no one solution that will address all situations.
2 There’s an old marketing saying that people make decisions based on emotion and justify with logic. This certainly applies when it comes to succession planning.
3 From this it follows that you can’t use logic when dealing with the psychologic. From the incumbent’s perspective, their connection to ‘their’ business often goes to the core of who they are.
4 The bottom line is that people ‘do things for their reasons not mine’. All the logic in the world won’t cut the mustard until you’ve identified the real issues, and they make sense from the incumbents perspective.
5 Every incumbent I’ve ever met knows someone who died within 6 months of retirement, ie the alternative we offer them is not an attractive one. What’s more, most dynamic, involved business people enjoy golf/travel as a pastime, but don’t see it as a profession.
6 The incumbent isn’t the only person you have to convince. There is what is known as the ‘succession conspiracy’. Spouses, other children, long term employees and other stakeholders often resist the process as well.
Unfortunately, as most of the business world works on an ‘efficiency paradigm’, the general approach is to work hard on ‘the old bugger’ and convince him or her that it’s time to move on. What’s more we’re surprised (even shocked) when they don’t see the logic in our well-presented argument.
However the natural response to being pushed is to push back even harder and this tends to happen in most cases when using the traditional approach.
I believe the answer is to spend the time to understand what truly motivates the incumbent. Stephen Covey’s ‘seek first to understand, then to be understood’ is a useful approach.
What else do they want to achieve, what will their next purpose be, is there a role in the business that they would like to devote time to (ambassador, product development, historian), is there an abiding passion to do something totally different, do they want to create a legacy that ensures that the decades they have spent building the business lasts beyond their lifetime?
I have no idea what the answer will be, it takes some good questioning skills and a lot of empathic listening to find out. Unfortunately I haven’t been able to refine the process into something that can be sorted out over a quick coffee. It’s more like a good malt or a few bottles of red spread over time.
We also have a role in coaching the successor in how to have these conversations. They will often need to establish a new relationship with their parent. I find that genuine respect for both the person and their past achievements goes a long way. You may also need to work with the other stakeholders mentioned above.
Succession planning is merely a sub-set of strategic planning and I believe that as Mindshop facilitators we are ideally placed to help our clients deal with these issues. But it goes beyond the transactional. It’s a very personal issue, and we ignore that side at our peril.
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