Itts my turn

j-lNce upoN A rrur, family business patriarchs had it \-feasv when it came to decidins who would take over the famiiy business.

Centuries-old customs required that the eldest son received control of the family business upon the death of the father. No one ever retired. Business literally lived or died based on the often-unknown management skills of the male heir, which often were not revealed until dad died.

Today, family business succession is handled with more forethought and under the greater scrutiny of inheritance laws. Affluence, combined with people living longer complicates the difficult decisions of when and how to pass the reins of the family business-with the least harm to the business and family.

The question of who gets to run the family business is complicated, of course, by relationships within the family. Numerous clients have confessed that they are troubled about how to pass the business without destruction. While many still plan to be an integral part of their business for several more years, they realize that their desire to work long hours had waned in recent years. They are slowing down. What worries many of them is deciding which of the heirs will make the better leader in the long run.

One client commented that he felt "a little like Solomon in the Bible, trying to divide my baby, my business, between two heirs. Somehow that seems almost easier than picking one over the other. I love what I do," he said, "but I don't see that same passion in either my daughter or son."

But that passion might actually be there, just displayed in a different way because each person has a unique per- sonality. Indeed, the heirs may be eager to have their turn at running the business. These kinds of dilemmas are far from unusual, and they underscore the very subjective emotions that cloud the business choices a senior family member must make about the future of the business.

If it's any comfort, the challenge of passing on the family business is a worldwide problem. A family feud over who should run the Hyundai Group, South Korea's largest conglomerate, brewed up a dispute that involved the national government. Finally, the S4-year-old founder of Hyundai appointed one of his sons as the sole group chairman to end the family squabbles. But this decision came in the face of a national movement to discourage family dynasties that do not involve shareholders and board members.

The image of passing a baton on to the next person in a relay race is a familiar one. It is an apt image for businesses in which a family business leader hands over the responsibility to a child. Even under the best of circumstances, it can be a difficult and awkward time of transition.

For the elder leader, it means giving up control not only of the business but also of the parent-child relationship. The relationship rarely stays the same at home once control is relinquished at the workplace. Moreover, the parent becomes dependent upon the success of the business in a different way and may feel vulnerable to the business decision being made by the child.

As in a relay, once a runner passes the baton, he spends the rest of the race as spectator and cheerleader, but no longer contributes directly to the outcome. For an entrepreneur who feels he has been the sole motivator for the birth and continued success of the business, this new limitedpartnership role requires a new understanding, a new patience. Furthermore, few people are prepared for the slowing down that all of us should expect as we get older.

It is important to see that a relay race is the perfect metaphor for life. We humans are designed to pass on our knowledge and possessions from generation to generation. The human lifespan is a natural cycle that begins with a period of development and learning followed by a long middle period of accrued experience and activity followed by a gradual diminishing of energy and ability. When a senior family member acknowledges this natural cycle, the transition can be accomplished with less strain and less stress. Succession isn't necessary the result of a "crisis" within the family business.

Another complication can occur when the family business leader maintains financial control of the company while turning the day-to-day operation over to another member of the family. Power is divided, and the next generation tier isn't fully able to independently change or expand. The nowformer c.e.o. may be also obligated to pay employees and other overhead expenses even if the company experiences a downturn as the result of the transition. The time-worn issues involved with parent-child bonds of dependence are also a factor, with the child trying to establish new roles of independence.

As with the relay race, planning ahead is the key to success. Know your runners and their individual strengths. Who is the fastest at the start? Who has a sustained start? Who has a strong finish? In a family business, skills needn't be dropped just because one family member is in transition to a position of less involvement.

The timing of any business transition is critical. Procrastination can become a healthy attribute when you're trying to have the business suffer as little chaos as possible from any transition of power. In other circumstances, such as when a senior family executive's declining powers result in poor decision-making, speed can be essential. In any event, it is necessary for the entrepreneur to work hard to plan a succession.

It's importanttorealize that there is a window of opportunity for a smooth hand off of power and control. The children need time to develop the skill set necessary to carry the business forward. They need the concentrated mentoring of the outgoing c.e.o. or president. Similarly, the patriarch must realize that the children may want to make changes in day-to-day operations. Change is natural, even when someone else initiates it, even by a son or daughter.

The next generation needs to be allowed to take risks similar to what the senior entrepreneur took to gain his or her own competence and skill set. But watching the next generation take risks with your business takes a certain amount of lip biting.

And don't forget the post-transition problems. Now that the entrepreneur has less responsibility to the family business, and more leisure time, what will he do with the energy and time once devoted to the business?

Planning retirement and leisure time may actually be necessary.

A succession plan that involves both the new relay runners at the helm of the business as well as the entrepreneur's diminishing participation can help the business transition go smoothly. Here are essential elements of a succession plan:

Make continued business leadership a key goal. This can be accomplished through a series of planned meetings with family-member owners to discuss their goal, wishes and concems.

Gather, analyze and share financial information on the company and on current owners, including ownership percentages, tax records and tax commitments, value of the business, and organizational structure.

Remember that taxes may be a key factor in any transition of business. A comprehensive estate plan for any outgoing shareholder should be considered.

Strive for a balance of equity. Answer these questions definitively: How many business assets will remain with the senior entrepreneur? How much will be passed onto heirs, both inside and outside the company?

Work hard to clear up the major muddy area of how much parental authority will be exercised over the children. How much should the senior entrepreneur pass on to the children? How much should these children be required to earn and do for themselves?

These are difficult questions that require objectivity and, therefore, generally require an outside consultant who has no emotional investment. These objective decisions must be made in the best interest of the busiNCSS.

Once upon a time, it was simpler. But today, with all that is at stake and all the complications of the day, it's a wise leader who knows how to pass business responsibility to his children. When asked who should run Ford Motor Co., Henry Ford said that "asking who will run the family business is a little like asking who will sing tenor in the choir-the tenor of course."

- James Olan Hutcheson is managing partner and founder of ReGeneration Partners, a Dallas-based family business consulting firm. Reached him at (800) 406I I l2 or www.regeneration-partners.com.

Reprinted with permission of ReGeneration Partners. No portion of this article may be reproduced without its permission.

Southern Building Material ness in the Future?," roundtable disAssociation has selected the theme cussion "The Future of Our Family "The Tide Is Turning" for its annual Building Material Businesses," summer conference July 26-29 at the exhibits, golf tournament, and comWyndham Virginia Beach Oceanfront mitte and board meetings. Resort, Virginia Beach, Va.

Dr. Ed Seifried will address "Turning a Troubled Economy into a Recovering Economy" and Burman Clark will cover "The U.S. Supreme Court's Ruling-How It Will Affect Your Health Insurance."

Also on the agenda: the panel discussion "What Five Things Created by This Downtown Have Most Seriously changed the Way We Will Do Busi-

Northeastern Retail Lumber Association affiliates are keeping busy this summer.

Central New York Retail Lumber Dealers Association will gather for an Aug. l6 clambake at The Spinning Wheel, Syracuse.

Northeastem Young Lumber Execs will watch the Boston Red Sox battle the Anaheim Angels Aug. 23 at Fenway Park, Boston, Ma. The group will also host a Sept. 19-21 lumber tour in Maine.

Sept. 7 is the annual meeting of Retail Lumber Dealers Association of Maine and New Hampshire Retail Lumber Association at Sheraton Portsmouth Harborside Hotel, Portsmouth, N.H.

Sept. 13 is the annual meeting of Long Island Lumber Dealers Association at Villa Lombardi's. Holbrook, N.Y.

Aug. l6 is a Twins baseball game at Target Field, Minneapolis, Mn., to benefit the association's scholarship program.

A shooting event at Oak Creek Sporting Club, Brainard, Ne., is scheduled for Sept. 26.

Mid-America Lumbermens Association will host a Sept. 27-28 trott fishing trip to Cotter. Ar.

Mid South Building Material Association will hold its mid-year meeting Aug. 3-4 at the Embassy Suites Hotel New Orleans Convention Center, New Orleans, La.

The event begins with a social gathering, followed by a board of directors meeting and a joint Mississippi/Louisiana roundtable.

New Jersey Building Material Dealers Association plans an Aug. 20 golf outing to Knob Hill Golf Club, Manalapan, N.J., and an Aug. 24 fishing trip to Highlands Marina, Highlands, N.J.

Indiana Lumber & Builders Suppty Association will gather for its annual Sycamore Scramble golf tournament Aug. 2 at Oak Tree Golf Course, Plainfield.

GULF SOUTH FOREST Products received the Presidential "E" Award, which recognizes expansion of U.S. exports and was instituted by President John F. Kennedy 50 years ago, Pictured (/-r) is Gulf South's president John Yohanan, U.S. Commerce Secretary John Bryson, and Gulf South's c.e.o. Sam Yohanan.

Northwestern Lumber Association will host golf outings July 25 at the Golf Club at Cedar Creek, Onlalaska, Wi.; Aug. 23 at Hickory Grove Golf Course, Fennimore, Wi.; Aug.21 at Royal St. Patrick Course, Wrightstown, Wi., and Sept. 27 at Lake Panorama National Golf Course, Panora, Ia.

Michigan Lumber & Building Materials Association will hold its annual golf outing Aug.2 at Hawk Hollow Golf Course, Bath.

Northeastern Lumber Manufacturers Association has scheduled a board meeting and golf outing for Sept. 20-21 at York Harbor Inn, York, Me.

National Hardwood Lumber Association will host its annual convention Sept. l2-15 at Sheraton Hotel & Towers, Chicago, Il.

Seminars will cover such topics as energy management and assessment, recruitment and retention, estate planning. and market trends.

Events will include golf at the Harborside International Golf Center to benefit the Hardwood Forest Foundation, plus cocktail receptions, dinners, and a trolley tour of Chicago.

Southern Forest Products Association is one of four organizations selected to receive funding from the Softwood Lumber Board to complete a joint project with the NAHB Research Center on the feasibility of raised wood floor construction.

American Wood Protection Association posthumously bestowed its Award of Merit on Dick Jackson. founder of Pacific Wood Preserving, who died March 15 of cancer.

Gerald C. Sapperstein, 85, former owner of several Pennsylvania retail and wholesale companies, died June 2 in Doylestown, Pa.

After serving with the Merchant Marines during World War II, he opened wholesale distributor Canadian Forest Products and retailer Lumberjack in Conshohocken, Pa. In the 1960s, he helped open Mr. Plywood, Philadelphia, Pa.

Edward M. Ryan, 88, co-founder of Green Hills Lumber, Upper St. Clair, Pa., precursor of 84 Lumber, died June I in Upper St. Clair.

During World War II, he served as a lieutenant in the Army Air Corps and received a Purple Heart.

After the war, he started a homebuilding business that later became Ryan Homes. He also co-founded Green Hills with his boyhood friend, Joe Hardy, who took over the business in 1953 and renamed it 84 Lumber.

Kenneth L. ttTiger" Geesaman Jr.,46, president of McCune Lumber Co., Shippensburg, Pa., died May 3l