At Predictable Futures, we help businesses every week working through the challenges of transitions of ownership and leadership. Still, when it is our own business, all the things we know don’t relieve us of having to go through the same issues as everyone else!
One of the common challenges most businesses experience is planning for leadership transition. When this is complicated by an accompanied ownership transition, the issues can become even more intertwined. Most leaders know when they need to begin preparing for transition (spoiler alert – it is usually sooner than you think!), but the complexities of “changing the guard” can deter them from moving ahead in a clear way. This is especially true when there are also lots of issues in the day-to-day.
A valuable question for a lawyer to ask to assist a succession or estate plan is “what are the goals you hope to accomplish through the planning process that allows us to produce the documents to guide your family in the future? What are the family principles and values that guide your decisions?”
One of the questions we regularly ask clients is “do you have an up to date will?” The most common response is an admission that there is no will, or that their will is out of date, “but we are planning to get them updated.” This is very understandable. Wills and other legal documents are put in place less for active management of our day to day affairs, and more for guidance when things are not going the way we would like (eg. death, divorce, partnership break ups, and so on).
I recently listened to a retirement planner who asked the group what they thought “retirement” actually meant. He let us discuss a variety of ideas, and then provided us with his working definition: “Retirement is when you do not work because you have to, though you may work.” His concept is that – at some point – many people do not need to work in order to meet their financial needs, but they may work to satisfy other needs.
There is an old story in our profession about an 86 year-old founder, who one day call his (64 year old) son into his office, and announces “I am finally ready to hand over the company to you.” His son smiles, and then responds “Dad, that is great. But I will be retiring next year, and my kids are grown and doing other things, so they aren’t interested.” This is somewhat humorous, and seems almost unbelievable, but I actually came face-to-face with the almost exact same situation last year (though the founder was actually even older!).
Deciding who leads the company next (whether in the first chair or a supporting role) is a key responsibility of the current company leadership and ownership. However, it is a decision and process that is often left late, or not done nearly as well as it could be. That is understandable – especially in a small to mid-sized company (where there is a smaller group of insiders for consideration) and family-owned businesses, where several extra factors come into play.
Most successors I meet are more than ready to go. Generally, they are even somewhat frustrated by the hesitation of the Founder to get out of the way and find it hard to understand why more trust has not been transferred to them in leadership. Even this past month, I met with a successor who was mystified by why the previous generational leadership was not moving more quickly to adopt his ideas and moving ahead to put him in key areas of responsibility. In fact, this young leader was wondering if he had made the right choice in coming to the family business, and was considering going elsewhere.