Is the Next Generation Ready?
As the next generation leader of the family business, there are many things that need to be done in order to smoothly transition the business.
First, let’s discuss what we mean by “transfer.” From a business perspective, we tend to keep our eyes on the business and who currently owns it. This makes a lot of sense as, prior to the handoff, the business is and has been in fine, capable hands. So let’s take a quick look at the receiver, or the next-generation owner.
Just like in a relay race, the one with the baton does not want to let go until she is sure the receiver has a good grip on it. This is exactly how the current generation feels, too. However, the handoff, in this sense, occurs over years. You need to prove that you are capable of running the business before the owner lets go.
Ask Yourself These Questions
There are a few questions that need to be answered to determine if you are ready.
Do you have a sense of independence? There is a saying that it is lonely at the top. Well, it is. There is no one to talk to about decisions you make. Certainly, there is plenty of input, but ultimately you must make the final decision. Can you say no in the face of strong opposition? Do you know what your values are? Have you said no to your father, mother or whomever is running the business? All of this is required to be a leader.
Are you fairly good at what you do? If you are in a financial business and are not good with numbers, maybe the family business is not for you. You need to bone up on the essentials or have someone else who is an expert step on board. If you don’t know much about business and delegate it all out, you might find your money and your accountant missing one day.
Are you a good communicator? Can you speak and write fairly clearly? Are you confident when communicating in person? Can you tell people things they really don’t want to hear? At the same time, do you understand the importance of communication, and can you ensure that it happens on a regular basis?
Are you thinking ahead? Where should the business be three, five or 10 years from now? How should we get there? What needs to change? In business, the ground underneath your feet is always changing. Can you keep up and even get ahead?
Are you evolving? Are you constantly seeking out ways to improve yourself and be a better manager and leader? Are you a good listener? Do you seek out advice? Have you initiated a major project and seen it all the way through to completion, rising above setbacks?
The list can go on, but the point here is that the current generation is always evaluating you and will be looking at these types of characteristics and actions to get a feeling for how prepared you are to take over leadership of the garden center.
Put It All Out On the Table
The next area involves lining up other external parties. Do your siblings and other key employees support the transition of the business over to you? You need to find out where they stand and what concerns they may have. In a garden center, there will be some highly qualified managers who have a good relationship with the current leader. You may have siblings who either work at the business or receive income from the business. They will want to know their situation will be OK if you move into the leadership role. If they need to be moved out in order for the next generation to be successful, you will need to work all of that out.
The biggest issue to air out is what to do about mom or dad. From your perspective, it may seem as simple as, “Let me have your office.” However, you need to truly appreciate the difficulty of stepping down. As such, it is important to define, over time, what your parents will be doing with themselves once they are not fully engaged in the company. This brings up the following three questions: What role do they have in the business? What leadership roles will they have in the company after the “baton” is passed? What do they plan to do outside of work?
While these questions can seem easy, they are not. Ernesto Poza, author of Family Business, did a piece of work highlighting the various types of CEO exit styles. They are: The Monarch, who only leaves once dead; the General, who will leave, but plots a return; the Ambassador, who gets called in for the big deals; and the Governor, who will set a public deadline for his or her departure.
Changing of the Guard
The final steps in the transition revolve around retirement planning and ownership transfer. Needless to say, it’s important that your parents have sufficient means to care for themselves. This can be handled through keeping dad on to pull down a salary or buying him out. In the case of many family businesses where real estate is involved, rent can be paid for the facilities.
However, the most important aspect of transference is to get the topic on the table as soon as it makes sense. Many family business owners struggle to leave the business because they are so emotionally wrapped up in it, they have trouble seeing their child try to run the business, and they have trouble letting go enough to allow the next generation to make the changes to the business.
For many family business founders and owners, it’s difficult for them to relinquish their spot at the top of the mountain. Much of how people are remembered is by what they did at work. It becomes who we are. Letting go of this is tough. I had a client for whom we were simply trying to do some smart estate planning by moving over some assets to the kids. Even though he would lose no control and it would have zero financial impact, he still felt like he was “getting kicked to the curb.”
As for ownership transfer, the question is: Is there sufficient wealth or life insurance that would allow those who work in the business to inherit the garden center, while the other siblings receive cash? If not, then you need to plan for your inactive siblings having some ownership in the business. The best way to prepare for this is to have a meeting with your siblings, without your parents, to discuss everyone’s perspective. Try to come to a unified agreement on how you would manage the relationship in the future, and present it to your parents.
The greater sense you can convey to your parents that everything is handled on a personal, emotional, business and family level, the easier the transition will be for everyone involved.