YOUR MONEY: Is succession in your business plan? – The State
Succession planning is the most important event a family business will undergo. Trying to pass the family business from one generation to the next is fraught with risk, except for those who instill good communication habits and begin working early on a plan. One of the major questions, however, is: “Can the next generation successfully run the business?”
For owners, wading into the waters of evaluating the next generation is perhaps the biggest landmine they will face when looking at succession. Every business owner would love to see their life’s work continue within the family. However, the next generation is not always interested or, frankly, capable.
Probing into this area can be awkward, needing to balance grooming with allowing the next generation to utilize their unique talents.
Starting early is best. When the kids are young, bring them to work when you can, just to get them familiarized with the business. Even better, if there are some odd jobs that need to be performed, get them engaged. When I was a 14 years old I took the bus to the Olan Mills plant for a summer to work in the back room assembling photo layouts. (Those of you old enough may recall those little oval cut-outs with the picture behind it.) It was rather boring work, but I had the opportunity to do some real work, learn the ropes from some experienced employees, and make a little money.
Having this exposure to the business early on can whet the appetite of the next generation to want to join the business, and foster an interest in them to grow the business. It also can engender a sense of ownership, which in turn can create a sense of responsibility and independence.
Once the child is old enough, a conversation needs to be had regarding their potentially joining the business. This conversation can take many flavors, but most of all it needs to be honest and unbiased. You need to express to your child that the family owns a business, and as such the thought of the child coming into the business has probably crossed the mind of the child and the parents.
You should state: “At this point it is too early to know whether or not the business needs you, but it would be wonderful if at some time in the future you were interested in joining and had capabilities to contribute to its success. No one is forcing you into the business. You need to determine for yourself what your passion is in life and discover what your talents are.”
Most importantly, make it understood that this is a live and on-going conversation: at some point the family may really need to have the next generation join, at some other point the next generation may declare that they are not really interested, and at some point the owner may determine that perhaps the family business is not good fit for the child. Promise each other to keep communication lines open as time goes by.
One highly correlated factor of next generation success is spending some significant time working outside the family business. While the gaining of practical experience is good, the important part is allowing the next generation to find out who they really are and gain a sense of independence. Gary Brown, the CEO of Transales Logistics Services in Sumter, is a good example. “I wanted my son work outside the business for at least five years before even considering having him come work for us. I wanted to be sure he knew what else was out there.”
If you start early, open communication, let your kids experience the business, and make sure they know what else is out there, you will have a much better chance that the next generation will join the family business — and be successful.
Henry Hutcheson is the president of Family Business Carolina. Reach him at Henry @familybusiness carolina.com.