Grow the next generation of lamily business leaders

IIfs ALL KNow that family busiV V nesses are great places to work when the family gets along and the business is doing well. When the business is not doing well or when the family is not getting along, they are not much fun.

Passing on the business to the next generation is the aim of most entrepreneurs who work to build their business. But this does not happen all by itself. It takes planning. communication, and a will to do it. The downfall of many family businesses can be traced to the lack of good succession planning.

There are three key issues that cover a big chunk of the real estate about why family businesses fail to make it into the next generation:

Control issues of the founder. Entrepreneurs like to be in control. They work extremely hard to build a business, and they like to have a hand in everything that is going on. Once the business is successful and growing, it becomes increasingly difficult for them to let go. If they do not find a way to loosen the reins, the next generation gets anxious. impatient and discouraged.

Son John says, "l'm 45 years old. When am I going to really run this business?" Even when dad hands over the reins to Johnny. how many times does dad appear in the office, only to throw a monkey wrench into the operation. (A lot!)

Dysfunction of the family. The family itself contributes to the problems in passing on the business. The lack of a plan on the business side inflames already heated emotions among the siblings. Serious dysfunction, mental illness, addiction, entitlement, and self-centeredness may combine to make a transition next to impossible.

No development of the next generation of business leaders. Usually, if there is no clear strategic vision for the business (a strategic plan), no one really knows where the business is going. Therefore, they do not know what to focus on. Without that plan, next generation leaders do not get developed. All the good will, hard work, and devotion to the family and the business does not compensate for the lack of a stratesv.

A successful transition has four key elements: creating a strategic plan, choosing a successor, devising a contingency plan for succession, and developing the next generation of leadership.

Entrepreneurial drive and focus get the business to a certain level. As the business grows and matures, it is the vision of the founder that moves it in the direction to keep growing. But, at some point, that is not enough. A well-conceived strategic plan is crucial for the business to grow beyond the dreams of the founder.

The choice of a successor (or successors) is a big stumbling block for many enterprising families. It should be undertaken as early as possible. Waiting until dad is well into his seventies is too late. All stakeholders should have input into the process. It should be a transparent, open process, so that all concerned know, all along the way, that this is an important decision for the business and the family.

Every good plan has contingencies built in. For example, if the owners want John to become c.e.o. in five years, everyone involved must be aware that John may decide he does not want to be in the family business anymore, or it is clear he is not the right choice. All of these issues must be addressed in the planning for the choice of a successor.

The next generation of leaders will either bring the business to another level, or watch it slowly slide off a cliff. The key to leadership development is understanding the needs of the business and what skills the potential leader needs to develop. In helping guide the development of the next generation of leaders, I use the PEP model; people, experience, and programs.

Mentors, advisors, family members and business colleagues all can serve to help guide the potential leader. These can be extraordinarily influential relationships. For example, in one family business, the young leader developed a close relationship with Uncle Tony who worked in the business. Tony did not have a major leadership role in the business, but he had spent the last 35 years learning it. He was thrilled to pass on his wisdom to his young prot6g6.

Experience outside the family's business is crucial if the young leader is to develop a panoramic view of the industry. Working in a related industry can be of enormous benefit to the person entering the family retail lumber business.

Formal educational programs in a university family business center can be helpful for the entire family, as a way to learn more about strategy, business development, or the dynamics of family businesses. For the young leader, contact with same generation peers gives the person a group that he or she can call on as they progress in their development.

Ideally, these PEP domains are integrated with each other so the young leader will have experience outside the company before joining the family business, pursue more formal education or coursework, perhaps in marketing or finance, and finally, that person will have a range of helpful relationships, from mentors in and outside the company to advisors such as executive coaches and family members.

Family businesses face enormous challenges as they move from one generation to the next. A clear strategy for the business, coupled with a plan to identify and develop the potential leaders, can provide a path for the family to move toward its soals.

- Gerard Donnellan, PhD, is a family business consultant and or gani4ational psychologist specializing in next-generation transitions. He is the author o/Grow the Leaders for Your Family Business (Without Giving Them Big Heads and Making Them Think They Are Kings of the World). He can be reached at (781) 86 3 - 5 3 54 o r ge rryd@ bi g- leap.com.

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By Marty Stanley