Last week we began a series of three articles addressing why family businesses fail to do succession planning. The first three reasons are that succession planning is rarely urgent, plans tend to focus on tax avoidance and “drop dead” scenarios which create a false sense of security, and family members and/or employees push back against the plans being considered. This week, we’ll address three additional rationales for failing to plan, and we will conclude the series next week. As always, we’re interested in your feedback; please add your comment below or email me at wayne.rivers@familybusinessinstitute.com.
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4. It’s always safer not to change
Dr. Mike Lyons, FBI’s resident psychologist, says, “It’s always, always, always, always easier to NOT change.” Think about it; deciding not to change – whether you’re talking about a business or family strategy – is, in the short run, easier. It doesn’t cost anything in terms of time or money, no one will have hurt feelings, there’s no pushback from employees, the senior generation doesn’t have to sweat over issues relating to their aging or eventual demise, there’s no new discord over this plan or that, the family doesn’t have to hire any new advisers or employees, and the status quo can continue to be the status quo. In the short run, Dr. Mike is right; it’s always easier and emotionally safer to NOT change. However, what works in the short run to preserve the status quo can be a death sentence in the long run for families in business together.
5. Family businesses don’t know how to undertake succession planning
We’ve had lots of calls over the years from people who were “kicking tires” about doing some family business succession planning. The conversations end with “Well, until I know my own goals and those of my family, there’s really no point in getting started.” That’s always been a frustration to us; if a family business owner doesn’t know her own mind and her own goals by now, what makes her think that by putting succession planning off for another month or year she’ll have any new insights? The fact is that intergenerational transition only comes along – you guessed it – once a generation. Therefore, most family businesses don’t have a track record to fall back on in terms of how to get started, what to do, what problems might arise, how to resolve thorny issues, family business best practices, etc. If it was simply an operations issue, most experienced family business leaders could provide an answer and knock the issue out of the park in no time flat. But since succession issues come along so infrequently and what worked for dad or granddad’s generation may no longer be relevant today, they don’t know where to start in terms of planning, so they just don’t start all.
6. Lack of courage among the next generation family business leaders
It is difficult to describe how many calls we get at The Family Business Institute from successor generation family business members who say “My mom and dad are 80 years old, and they still come in every day and make all the decisions. I’m 54 years old, and I have no idea what their plans are, nor do I seem to be able to advance myself and increase my responsibility. I know I can take this business to a new level, but….” The lack of courage among 40- and 50-year-old next generation family business members is appalling. For them to not be able to have a blunt, open discussion with their parents about the need to do succession planning and to professionalize the family business is outrageous. The love and reverence they have for their parents causes them to behave not as family business peers but as adolescent children. At some point, it no longer makes sense to allow love, respect, or reverence to stand in the way of undertaking planning that would benefit everyone in the business as well as employees, customers, vendors, and others. Successor family business members need to grab themselves up by their bootstraps and, if necessary, force the issue. If they’re not willing to do that, if they’re not willing to reason with their parents as adults, maybe they deserve the frustrations they’re experiencing.
Next week, we will conclude this series by examining three additional reasons family businesses fail to plan their futures: family fairness, seeing transition as an event and not a process, and cost.
Click here to review part one of this series.