“’You’re still too young to run this business,’ said the father to his sixty-something-year-old son,” recalled Niagara University Family Business Center Director Vince Agnello as he reflected on succession planning. According to Vince, the father “just couldn’t give up control.” Vince and Family Business Center Program Coordinator Gerry Catalano invited me to speak in December about family business succession planning at an NUFBC breakfast seminar. The audience consisted of operators of family run businesses. Some of these owners were second- and third-generation family members.
I was impressed by the attendees and their questions for me. For example, one attendee wanted to know: How do you decide which sibling serves as CEO when several want the role? Another asked me: When did your father know you were ready to become CEO of your firm? A third person wondered: How can an owner protect a family business if a successor divorces?
The answers to these questions and many others stem from four succession planning principles: communication, funding, transfer and support. Communication is about addressing both the owner’s concerns as well as the successor’s concerns. In my case, my father wanted me to have, among other things, professional experience (e.g., getting knocked down and around) before I stepped from college into the family business. There was no place in my father’s office for a sense of entitlement. I wanted assurances that my role wouldn’t change if other relatives joined the company after me.
As for funding, that entails planning for how you’ll look after your asset (i.e., the family business) if faced with a lawsuit, divorce or sibling rivalry. Next, there’s the need to develop a payment schedule for transfer from owner to successor. And the last point we’ve already touched upon – support. That includes defining roles for the new owner as well as the retiring owner.
What makes a CEO great, said Peter Drucker, is the leader’s ability to choose a successor and get out of the way, so the successor can run things. As Vince Agnello remarked, sometimes all the planning in the world can’t overcome an owner’s refusal to simply step aside.
If you’re interested in this topic or any other family business issue, please visit the Niagara University Family Business Center.
If you’d like my succession planning checklist, contact me at [email protected].