Family business owners know the pain of giving a child up for adoption. Their business, which they bore and raised from infancy, has grown and matured. During that maturation, they too, have grown and now are older.
The final quarter comes at a different time for everyone – there is no magic age. Plenty of owners/founders are active and sharp well into their 70s and 80s. Some of these captains of industry will choose to pilot the boat and die at the helm. But is this the right decision? Others will choose to step off the bridge and turn over the wheel to the next generation.
But when is the right time?
In working with business owners daily, I can share that most stay too long. The demands of the job change with the business through the years and often the skillsets of the owners shift, but rarely change too much. When the next generation has a skillset more in tune with the current generation of customer, it may be time to hand over the reins.
Understandably, this is a painful decision. This is your baby! Even turning the baby over to a relative or child is heart-wrenching.
The next generation needs to understand this fact. Too often, next generation children look to wrest the captain’s hands from the wheel too soon or are callous in their approach. I have seen this actually end up in court, which ends in disaster for everyone. But I have also seen the captain stay at the helm too long, and this is equally disastrous.
For example, a longtime founder is well into her 70s (facts changed to disguise and protect the family). She has several children who are in the business and are well into adulthood. The children have long participated in the business to the point of servitude. Salaries are below the standard in the industry, and decisions they make are countermanded by the founder. They have sought outside help, but the owner does not live up to her promises and reverts back to treating the adult children like the kids they once were.
The children have remained patient, but that patience is wearing thin. The problem is that they have sweat equity in the business and to walk away from the company now would jeopardize that stake. Further, the owner/founder is making decisions which are not benefitting the firm, so the guiding hand of the adult children is crucial to business survival.
Sadly, this has gone on too long. It is past time…
Had the adult children worked with me sooner, I would have suggested walking away if the owner/founder did not stick to a predetermined plan to step down. Their intellectual property is transferrable enough to their own firm that they don’t need to remain in indentured servitude. It is possible this will damage the relationship with Mom, but the truth is, this relationship is strained and probably to the breaking point already.
Some owners may never step down, and frankly, that is their right. Hopefully with pre-planning and guidance, this process is as painless as possible, but it will never be pain-free.
Another family that will remain anonymous had an owner give the other members a two-minute warning before stepping down. Okay, it was two weeks, but it was really that sudden. Unrelated to health or any external issue, the owner just said one day that the next generation takes over in two weeks. That is an example of too sudden a transition. If not for the next generation, think about the external workers, vendors and customers.
One of the industry experts I have talked with, Jeff Billings of Godfrey & Kahn S.C., has said repeatedly to clients that they need to plan and then work that plan. This allows everyone to know when the transition is coming and to not be surprised when it happens.
Much like a social worker present at the handoff between parent and adoptive parent, usually acting as an intermediary, it is important to subscribe to the services of an outside person to play that role. He or she can ease the hands of the owner/founder off that wheel, and sensitively handle the transition. The intermediary can also be the shoulder to cry upon, as that transition is tough. The next generation needs to understand that when it’s time, it is extraordinarily painful.
