September 20, 2014
For those of you whose businesses are owned by you and your family, have you ever asked yourself the question: “Would continuity of the business as a family business be wise?” Truth is, that’s only part of the question that must be asked. When considering succession in a family business, the question must be expanded to define which area(s) of succession you are referring to – e.g., succession in management, succession in governance, or succession in ownership.
If you cannot see passing the CEO baton to a family member because there is no candidate who is both capable and interested or because selecting one of several candidates could result in jealousy or worse, it may still be possible to arrange for successful succession of family governance, by having family member representation on (or control of) the Board of Directors. Even if directorships are unsuitable or unwelcomed by family members, continuity can be geared to family ownership.
All those positions require training and education. Being a director of any company requires new knowledge and skills – business operations, finance, competition, personnel, etc. – in order to accomplish appropriate oversight. Education and training is especially critical in a highly regulated industry such as banking. It may seem that ownership succession is a no-brainer in that you’ve covered it by using trusts and trustees. That may solve legal issues, but isn’t totally dispositive. Even ownership, direct or indirect (as through trusts) should be preceded by an understanding of certain business and governance matters. Generally, for successful succession, this requires planning and preparation starting years before transitions take place.
In my forthcoming book, tentatively titled INVENT, REINVENT AND THRIVE, The Key to Entrepreneurs Success and Family Business Continuity (to be published by McGraw-Hill next year), I will deal with the need for continual reinvention of self and business for entrepreneurial and multi-generational businesses to succeed. In it I share stories about famous and fabulously successful family businesses.