By Scott Philips
The decision is always scary – ‘who in the family is capable of effectively assuming and running the family business, keeping it healthy, and securing the retirement fund that the owner spent their lifetime building?’ The bigger issue, really, is whether the next generation is able to steward the business in a way that preserves (at a minimum) or improves (in the best case) the value of the business.
Making the right decision is often a major step of faith, made with no more than a hope and a prayer that the right person was selected. Sometimes that decision is made with the wrong criteria – hiring the oldest, hiring the most educated, hiring the one that is most like the previous leader, hiring the most outgoing, hiring the most creative, etc. These may be some of the attributes that are needed, but are ultimately not the most important factors when making a leadership decision.
Some of the more critical criteria revolve around the candidate’s foundational character and leadership capabilities. Are they leaders that are capable of motivating, collaborating, communicating and leading the team effectively? Can they do the work that is needed? Do they have the appropriate skills? Are they motivated to invest the time and energy to make it grow? Are they humble enough to listen to others who might know more than they do about a particular subject?
What a travesty for a parent, who has created, built, improved and optimized their business, to have a family member assume the helm and crash the business on the rocks. The numbers prove that this scenario is common. Family business transition success is staggeringly low: first to second generation is a mere 30% success rate, second to third generation is only 12% and third to fourth generation is less than 4%.
So, is there a better way? Yes, there is!!!
Two specific actions lead to a much higher success rate – 1) conduct a comprehensive Succession Review, and 2) implement a comprehensive family transition plan that incorporates leadership development, business improvements, and accountability for the initiatives required for a successful transition.
TruNorth Partners’ five-step Succession Review focuses on key criteria for the successor to succeed – key core values and motivations, strong leadership characteristics, proven business acumen, support from peers and other stakeholders in the business, and a history of performance.
In addition, TruNorth Partners has comprehensive plans for family transition. And, most importantly, we walk with families through the difficult decisions and actions that are required. To learn how you can navigate your tricky family transition and succession, contact TruNorth Partners at firstname.lastname@example.org.