If Family Business Succession is “The Big One” – being the most common cause of conflict in family business – Business Family Succession runs a close second, in business families.
Businesses “enjoy” having legions of advisers at the ready with reams of rational, objective, precedent-based, best practice advice. The consequences of their success or failure are easily assessed in arithmetically quantifiable, monetary terms.
But the same doesn’t apply to families, where issues and consequences can be everything but “rational and objective”. Fortunately, over the past 30+ years, a lot of research, work and reflection have been invested in sussing out what does and doesn’t work for business families. We now have a sense of what constitutes best practice in that space. Of course, this being about family and all, things rarely go quite to plan!
From the outside, it’s convenient to believe that every business family conflict has its roots in money, greed, jealousy, and sibling rivalry, but in reality that’s never the whole, and it’s rarely even the main, cause of conflict. Any family dispute that turns into litigation, disputes in: family law, wills and probate, asset management, wealth distribution, business ownership, family trusts, and similar – are almost always driven by emotion – which stimulates action, frequently causes substantial personal and relationship distress … and inevitably costs the family a heap.
Litigation between family members is a form of combat by proxy. It must be driven by emotion, because it seldom presents as an outcome of rational thought.
What causes that emotion?
Family leaders: a reduction in family leadership status raises intimations of mortality as it stirs fears for loss of status, relevance and identity. Leaders may feel a surging need to establish and leave behind a legacy – for altruistic or egotistical reasons. It’s mainly an issue of character and personality, mildly impacted by circumstances: some leaders accept change and adapt cheerfully, or with relief; others get discombobulated, stressed and aggressive, and fight against the inevitable.
They’re all being “pulled from the front”; some remain “rooted in the middle”.
Family successors (usually next generation members) are often in a hurry to prove themselves, show their worth, and claim their place in the family / business / world. They need to “arrive”. Their sense of urgency generates a pace wholly different to that of the older generation they want to “retire” so they can “refresh” the thoughts and actions of their business family.
They’re all “pushed from behind”, and trying to “find their way to the middle”.
Unreconciled differences in pace and diverging expectations produce friction, which easily causes conflict within business families.
There’s an old saying In the family business world: “Succession should be a process conducted over time, not an event caused by crisis” – although time itself allows many opportunities for tensions to bloom.
But you can’t plan and manage family succession when it arrives as an emergency event – say, a sudden heart attack. An unprepared business family has no time to work out how best to proceed – which makes the family and its business highly vulnerable. The family must do its best to work through the erupting emotional, financial and commercial challenges. And that’s precisely where we see competing needs and interests, deep-seated relationship issues, and profound personal insecurities creating conflicts in business families.
The best (only?) way for a business family to be reasonably confident of having a successful succession is by initiating, designing, negotiating, agreeing and implementing a detailed succession plan – well before succession needs to happen.
If it’s already too late because succession is happening, whether they’re ready or not, there’s a more urgent need to bring things under control.
Whether rushed or relaxed, the planning process should be inclusive, realistic and constructive. This is a time of significant transition (ie: change) for the family and, since succession only happens once in a generation, most participants won’t have much relevant experience.
Start by confirming the family’s agreed values and conduct an objective assessment of how well the family has been living those values. Typically, reference to shared values guides everyone into a collaborative headspace where the family’s collective, long-term goals can be accurately identified, sensibly discussed, and meaningfully agreed. And agreed goals are critical – they provide the the framework for the plan.
Next, discuss and agree individual roles and responsibilities (including leadership of the family), with particular reference to the progressive modification, and/or transfer, of specific responsibilities from the older generation to the next.
Do make a big deal of the fact that succession does not equal retirement (putting out of use). It’s a natural lifecycle process that should see older family members becoming sponsors of the next generation, where they replace their day-to-day “doing” with more time spent on future-focussed teaching, mentoring and storytelling, to strengthen the family’s legacy.
As elders morph into their new roles, the spaces they vacate should be filled by next generation members, progressively taking on responsibility for doing what the previous generation were doing: leading family decision-making, hosting family celebrations, organising family meetings, and managing the family’s wealth.