Passing the Torch without Getting Burned How to Build a Robust Gen 2 Company By Susan Galvin and Renée Garcia
Imagine a business that was built out of
typically an emotional time for the family, poor
company. The owner was a happily
and family relationships.
a garage into a vibrant and profitable
communication can threaten both the business
married man in his early 60s. His three
To successfully transition a company to the
adult children were in the throws
next generation and develop a framework
of their own lives, working and raising young children. There had been some discussion
on what would happen to the
Ownership
Family
for growth, a values-based approach can illuminate the best strategy for moving forward.
family business when Dad
Sharing family values is not the same as
going strong and the need to
a family that values loyalty believes in
decided to retire, but he was
sharing business values. For example,
transition the company seemed
a long way away. Then Dad went on vacation, there was a freak
accident, and suddenly he was
supporting one another through hard
Business
gone. With the company being their
family’s guest room. The business, however,
children had a decision to make: continue
must have high-performing employees to be
to build the company and carry on their
determination to make while in the throes of grief. A quick and frenzied decision was made that the daughter who lived closest would pick up the
torch and keep the fire burning. She quit her job and started running the company, navigating it
profitable. Thus, Cousin Joe may not be hired Figure 1 Experts visualize the family business system as three overlapping circles of Ownership, Family, and Business. Family members may occupy one or more of these circles, which blurs the boundaries and can complicate communication and operations.
toward an uncertain future.
We don’t have to imagine this scenario because
Ownership, Family, and Business (See Figure
This true story yielded many lessons. First, it is
these circles. This blurs the boundaries and can
Life has a way of throwing curve balls that don’t leave time for creating a clearly articulated plan.
1). Family members may occupy one or more of complicate communication and operations. For
example, a family-run business may have a father as an owner, an in-law as a manager and a blood
Second, the transfer of power in any type of
relation as an employee. The perception of each
and communication. For family-owned
not only by the position they hold in the company,
navigating the family dynamics. Transitioning
This can lead to confusion regarding the shape
complicated by emotions, relationships and the
second generation.
organization requires careful strategy, planning
of these stakeholders is going to be influenced
companies, there is the additional layer of
but also by the position they hold in the family.
to the next generation can be tricky, as well as
of the company when it is passed down to the
concrete need for a livable income.
Third, communication is key throughout the
John A. Davis and Renato Tagiuri at Harvard
life of a business, but particularly when the
system as three overlapping circles of
company to the next generation. During what is
University visualize the family business
32 • Vol. 12 / Issue 2 • International Surface Fabricators Association
simply because he is family.
Businesses started and managed by family
members need to have clearly articulated values
and envision the same goals for the company as it moves forward. This is like having a North Star
for a company, guiding all decisions and focusing resources toward the success of the business.
this is a story from our lives.
never too early to start talking about succession.
being fired after three months on the job
can be shown emotional support, invited
over for dinner or allowed to stay in the
mother’s primary source of income, the
father’s hard earned legacy or sell it. A difficult
times. Cousin Joe who has a history of
time comes for transitioning a family-owned
Many companies have Mission, Vision and
Value Statements that were developed when the
company was new. Moving to the next generation is a perfect time to revisit these statements.
This allows the family to celebrate the company that has become successful enough to be
handed down to the second or third generation of a family. It is also a time to evaluate whether these values reflect the current direction of the
company and will continue to revitalize its next iteration.
Once all stakeholders are clear on the company’s values, these statements serve as a reference
point in the midst of change. Think of company values as the extra guest at the dinner table.
When decisions are being debated, these beliefs
are consulted. The values guide the conversation