Succession Needn’t be Like “Succession” - Part 1
How these parents (and children) kept family business transitions from destroying the family or the business.
For families ready to transition a business to the next generation, the recently concluded Max series “Succession” isn’t just a drama – it’s a cautionary tale.
Brian Cox as Logan Roy presides over his wildly dysfunctional Roy family, as the next generation vies and connives to succeed him as the head of WayStar Roy media empire. It gives family transitions – that is, Successions – a very bad name. After all, “What did you really build if your family (or business) functions like that?”
Fortunately, most family business transitions are not this contentious. However, one thing the show certainly gets right is that family business transitions do carry risks – to both the business and the family.
Family Business Transitions are Risky
It has been said, "When a family business works, it's great; and when it doesn't, there is nothing worse." The downside risk is even more evident during transitions, which can pose an existential threat both to the business and the family. For the business, its stability, economic value, workforce and families, position in the community, and very existence are at stake. For the family, its happiness and cohesiveness are at stake. Bonds of love and trust can be either deepened or destroyed by how family members handle this vulnerable time.
Successions that Succeeded
As it happens, I’ve seen many generational transitions that have been successful for both the business and family. Recently, I went back to some of the players in those transitions looking for real-life insights that could help others.
I interviewed about a dozen CEOs of family businesses – half of them from the parent/retiring generation and half from the next generation. Even though family successions are not always between parent and child, I’ll use those terms for convenience.
Because the results were too rich for one article, I’m sharing insights primarily from the “parent” generation, and will follow up with tips from the next generation. Here’s what those parents had to say.
Start from Love and Respect
“We won’t love you anymore and we won’t love you any less; no matter what happens,” was the principle laid down by the father in a building products distributor. “What happens” might include joining the business; joining then leaving; joining and succeeding; or joining and failing. When the father told me this, he paused for a long breath and added, “Then you have to mean it; live it; believe it.”
“A family business is not worth wanting to avoid a family dinner,” was the lesson a next gen daughter in financial services took away from a valuable mentor. That mentor was herself a veteran of family business drama. The daughter took that to heart and has modeled her actions to match.
“Your children are not an unfinished ‘You.’ They are completely different. Unique,” continued the father in the building products business.
Another father in the industrial equipment industry noted with humility, “My mission, passion, desires may not translate to 2023.”
Love and respect from the parents were foundational elements to making the generational transition work.
Offer a Choice
Choice played a large role in nearly every conversation I had. For the parents, that means giving their children one, and respecting the choice they make. The parent as current leader of the business does get the larger voice in setting the terms on which the child is choosing. But every one I spoke to emphasized that you want your child to be in the business because they chose to be there.
“Dad, you need to compete with this offer,” said one son as he was weighing a corporate offer against joining the family business.
“No I don’t,” said the father, “You need to come here because you want to do this.”
Another father talked of the importance of self-selection, “a passion for this business.”
A third father gave his children identical offers: they needed to work in the family business for at least two years – and then assess the situation – before any next steps were open for discussion. One stayed and one voluntarily went elsewhere.
Another father told his children, “I will recruit and trick you (if possible) to get you into the family business … as long as you understand that you will exercise your own good judgment in making that decision.”
To offer children a choice and mean it, parents must be prepared to be turned down. This means being open to other options. If the parent generation wants the income stream to continue but the next gen doesn’t want to come into the business, one father had this to say, “Fine, you don’t have to come into the business. There is lots of liquidity and other alternatives.”
The hard part of course isn’t saying that other options are fine, it’s meaning it. But offering an open-hearted choice gives you, your child, and the business the best chance of success.
Set Clear Expectations
While these parents all made successful transitions, this doesn’t mean those transitions were perfectly smooth. Many of the bumps parents recounted were about unclear or uncommunicated expectations.
“I could have done more to make my expectations clear,” said one father, “but I didn’t really know what they were. I took a laissez faire approach, thinking it would all be ok.” Eventually, family therapy helped get this out in the open.
This father is hardly alone. The parent generation is used to being in charge. They make the rules and have the gold. Plus, obviously, they are the “parent” in the parent-child relationship.
On this topic, it’s really the next generation that has the most advice to give. They ask, and in some cases plead for torch-passing parents to clarify critical expectations such as:
What do you really expect from us? Do you want us to love the business the way you did; provide you guaranteed income; or grow the business?
Do you want continuing involvement in the business; and if so, what?
Down the road, if we think we should sell the business, what will you think?
If there is a financial transaction, help us understand the cash flow needs and mechanics. Gifting or selling looks complicated from the outside.
When it comes to role definitions, please look for win-win solutions, so my siblings or relatives are at peace with what you decide.
How will compensation or equity work?
If you are exiting, could we be clear about when?
What are the roles, and what authority will each of us have?
Will you be bungee-jumping in without warning after the transition? (Please don’t!)
As the parent, do the hard work of articulating your expectations. Consider getting some coaching / counseling assistance – before it’s time to implement them.
Communicate, a Lot!
Communication is the means by which family bonds are built or broken.
“Catch them doing something right” is a line I heard from my own children’s preschool teacher and from one of the fathers. Think of criticism as a bank withdrawal. To correct a behavior, you first have to have a positive bank balance. Is your bank account large enough? Think five-to-one or ten-to-one when it comes to praise vs. criticism. The father used an example of needing to shift 10 pennies from his left pocket to his right, giving a compliment each time, before his bank account was flush enough to provide criticism.
More than one family routinely held daily lunches together, even when there was no direct reporting relationship.
Others talked about keeping the wider-family’s focus on the company’s purpose and importance to its customers; why it exists and is special.
Another talked about the efforts made to keep business discussions separate from personal ones; and not to resort to personal characterizations.
If you are the parent, remind yourself that you are continuing to build a cherished relationship. Act accordingly. Plus the next gen family member appreciates praise just as much as other employees.
That’s part 1 of what I learned from successful real life successions. Do you have experiences you want to add? Would you like some help working through a succession of your own? Feel free to reach out.