Dr. Robert Doback: He quit college his junior year and said he wanted to join the family business.
Nancy Huff: But you’re a medical doctor…
Dr. Robert Doback: I told him that. He just said, ‘It’s all about who you know.”
— From the film “Step Brothers”
My dad thought I would take over the family business. But I told him several times I didn’t want it and his persistent misconception cost the family a lot of money and my dad a lot of grief, as I wrote in my last post.
If you’re the owner of a family business, chances are you have relatives working for you. You may have brought in your kids and placed them in positions of increasing responsibility, assuming that one day you’ll retire and fill your days perfecting your golf game or cruising around the world while the next generation takes over.
But have you ever asked your son or daughter if he or she wants to be the boss? You may be surprised by the response. Children crave their parents’ approval and don’t like to disappoint them. It’s possible they are in their current positions just to please you.
Your daughter may secretly be harboring aspirations to be an entertainment attorney or your son may be dreaming of a career in the medical field. Rather than focusing all their energies on the future of your business, they may be working towards their exit as soon as dear old mom or dad is out of the picture.
Not asking that crucial question is just one of the mistakes I see when family business owners deal with the question of succession.
Here are five others to watch out for:
1. Using guilt to get a family member to take over the company
Doesn’t the company you worked so hard to build and grow deserve someone at the top who is 100% devoted and whose skills match those necessary to be a successful CEO? Think about the last time you were guilted into something. Did you feel positive about it? If you ask your family member if he or she wants to take over and the answer is no or a halfhearted yes, consider other options.
2. Leaving the succession of a company up to a lawyer
I’ve heard this many times when I ask CEOs about their succession plan. “I don’t worry about that. My lawyer will handle it all.”
Lawyers are necessary for many aspects of your business. But they are often called in when the company is already in transition and will be focused on the legal issues. The key to an orderly succession is to have it planned out before you need it, and you need to consult all your business advisors when developing the plan.
3. Leaving the company in the hands of several family members
You can’t run a business by committee. “We’ll just get together over Sunday supper and decide on that then,” I’ve heard before. It’s fine to have family members talk over key decisions. But you have to have one person empowered to make all the final decisions.
4. Not picking a number 2
So you’ve gone through the process of picking a successor. Guess what? You also need a number 2. Let’s say your son takes over and he leaves the company in a few years to start his own business. Or your successor is your brother-in-law, who takes a liking to the diner waitress and sends you a “Having a great life” postcard from St. Croix. You need to have a back up.
5. Not educating everyone about the succession plan
Once you have a succession plan for the next CEO and the number 2 person, make sure all the family members know about it. There may be hard feelings over the selections, but it’s best to deal with them now and have everything settled before the transition.
It’s also important once the succession plan is made to communicate the plan to customers, vendors and bankers. Then, bring the successor into important meetings so there will be continuity when you retire or get hit by a bus.
So how do you pick the best people to run your company? Stay tuned for the next post on The Turnaround Authority.