England’s Prince Charles is going to be 65 years old this fall. Poor guy. He’s been waiting his entire life to take over as head of the family business. Now he’s retirement age and he’s still waiting.
The same scenario plays out in a lot of family businesses. A past retirement-age company president who isn’t ready to step aside can prevent an aging, frustrated son or daughter waiting in the wings from advancing the company.
PROS AND CONS OF A LONG-SERVING CEO
The CEO of a non-family business usually holds that position fewer than 10 years. The head of a family-owned business stays in the top job for 20 years or more. This long tenure contributes to the stability of the business, but it can also make the family-owned businesses stagnant.
A younger generation may be ready to lead, but can eventually grow frustrated and unmotivated if deprived of the opportunity. This frustration may cause the heir to the company throne to slack off or leave the company entirely, causing a rift in the family. Those who stick it out may find that by the time they get their turn to take over they are in their 50s or 60s, and have lost their youthful motivation to grow and improve the business. So they continue the status quo and the business stagnates or slumps.
PRIORITIES OF BUSINESS OWNERS
Researchers at Baylor University collected data regarding the attitudes of family-business owners when it comes to retirement. They found business owners tend to think of themselves with little regard for their eventual replacement.
When deciding whether or not to retire, heads of family businesses considered: their personal health, financial and psychological well-being, wealth transfer, continuity and viability of the company, owner transfer and leadership succession – in that order. Leadership succession was the last factor they considered.
This is not what you want to hear when you are an aging second-in-command. The son or daughter of a business owner may assume dad is waiting for them to prove themselves ready, but he’s really waiting for the time when he feels ready to step down. It’s not about the next generation and what they’ve done for the company or if they are ready to assume leadership. It’s about whether the owner is ready to change and let go.
CONSIDER THOSE OUTSIDE THE FAMILY
A business owner who refuses to think about stepping down for a successor’s sake should consider it for the company’s sake. If a business owner is aging and the company does not have a succession plan, customers, suppliers, employees and anyone else with an interest in the business may become anxious about the company’s stability and doubt its future. Lack of information can cause tension, possibly compromising the company’s financial health and longevity. A well-communicated succession plan, however, reassures people the company is well positioned for the future.
START THE CONVERSATION
No one wants to think about getting older or the possibility of a parent dying, so the topic of the future is ignored. But this hurdle has to be overcome. It has to be discussed. It is not unheard of for a tragedy to strike a family-business owner. If the subject of succession has never been broached, a business can end up in ruins due to a lack of planning and leadership.
CREATE A CLEAR TIMETABLE
Discussing the topic of succession doesn’t mean a company owner has to step down immediately. It’s not a coup; it’s a conversation. It means there is a schedule for delegating leadership to the next generation. Without set dates for specific events, employees may be perplexed by the chain of command and owners may linger long after they should have retired. Agree on a retirement date and determine when and how ownership shares will transfer.
Meet with family employees and critical non-family staff to review the succession plan, head off any problems and discuss any other related business issues. Keeping everyone informed as to who will take over the business and how the transition will work can prevent hurt feelings and confusion. Knowing the company’s future is on solid ground can motivate all employees, from the heir to the throne to the newest hire.
DETERMINE A POST-RETIREMENT ROLE
Some family-business owners can’t imagine a smaller role for themselves. If they can no longer be the boss, they want to walk away completely. Others stay on as a consultant for a while, which can make for a smooth transition or a confusing one, depending on how it is handled. Roles must be defined, and the successor should clearly be running the show. It’s good to determine a specified time to stay on as a consultant.
And the second or third generation to lead a company should learn from their succession experience so when their offspring are ready to take over, they hand over the reins at the optimum time in a smooth manner. To that end, maybe Prince William is learning something from watching Elizabeth and Charles.
