In speaking with our clients on how they are managing their businesses and people through COVID-19, a number of key themes have emerged which we would like to share with you.
Having your house in order in the event of unexpected events. Are you taking decisive action in planning the transition of your business to the next generation or group of leaders?
Transitioning Your Family Business to the Next Generation
Does Not have to be a Tortuous Experience:
1. To accomplish a successful transition keep the following in mind:If you intend to keep your business in the family, contrary to common wisdom, according to longitudinal research do not hesitate to talk shop with your kids, nieces, nephews, etc. from an early age; peak their interest and excite them by de-emphasizing the struggles and highlighting the opportunities and self-determination associated with controlling their own destiny;
2. Create a Family Charter once you decide to keep your business in the family; involve all family members in the process, including extended family who you anticipate wanting to join the business, as well as those in the immediate family who prefer to pursue alternative career options. The Charter should contain a vision statement, mission statement and reflect the values of your family. It should outline the educational requirements and work experiences expected of those who wish to ultimately join the family business. It ought to delineate such governance structures as Senior Advisory Committees, Shareholder Committees, Investment Committees, and Family Office. Promotion criteria, path to partnership/ownership, participation of sons and daughters in-law, compensation issues, and non-compete expectations should a family member decide to leave the family business ought also be reflected. Given the complexity of this exercise, the various points of view likely to be expressed, and the natural differences between current and future generation owners, we have seen this process take 10-12 months to complete. The crucial thing to remember is that the Charter becomes a key touchstone in making important decisions, setting company strategy and resolving differences.
3. In addition to the educational, work experience requirements and stylistic qualities necessary for filling roles in the business, especially leadership roles, when there are 2 or more family member candidates for any role, in order to avoid succumbing to a sense of entitlement or placing the wrong person into a specific role, we strongly recommend utilizing a data-based approach to determining which family members are to be selected for respective roles. As an I/O Psychologist, I recommend utilizing objective tools (behavior-based interviews, leadership effectiveness assessments, emotional intelligence questionnaires and behavioral style tests) and processes to ensure that you aren’t placing a square peg into a round hole, as well as taking bias or favouritism out of the equation.
Should you be interested in receiving upcoming issues of recommendations and case studies related to transitioning your family business to the next generation, please let us know via e-mail or call:
Gerald (Gerry) Pulvermacher, Ph.D., C.Psych.
Future segments will deal with resolving differences without impacting family stability, taking your business to the next level so as to avoid the “death spiral” described by Adizes, building a robust strategic plan and implementing it successfully, leading the change process, educating the next generation….to name a few.
***PulvermacherKennedy & Associates has specialized in assisting families transition their business to the next generation for several decades. We have assisted both medium and large scale businesses with the process, including businesses which have transitioned over multiple generations. Our clients are to be found in the Northeast and Southeast of the USA and Eastern Canada.***