Page 41

The Family Business

by Megy Karydes

I

How NOT to handle transitioning the family business

There are many important questions to be answered when a family business owner begins to consider who will take over the business. Experts agree that planning in advance is key and the best exit strategies are put in place well before the decision to leave is made. It’s just as important for the owner to accept the fact that it’s time to turn over the reins as it is for them to find the best replacement—and that’s sometimes easier said than done.

David Wimer, author of INSIGHT: Business Advice in an Age of Complexity, is founder and managing principal of David Wimer Advisors, LLC, where he works with privately held family businesses to navigate business transitions and prevent financial crisis. We asked him what family business owners should not do when it comes to transitioning the business from the current owner to the next generation.

t’s going to happen eventually: the family business owner will have to transition the business to someone else. When is the right time to lay the foundation? How does the owner decide who will assume the leadership position and what steps can be taken to ensure a smooth transition? Is learning on the job the best education or should the next leader get an MBA?

“The first step is to acknowledge the importance of preparing interested family members well in advance, and that this transition will have an impact on all family members who may have a stake in the company without necessarily working there,” said Emily Bouchard, co-author of Estate Planning for the Blended Family. “The parent currently in charge also needs to prepare for incrementally letting go of control, while remaining available as a mentor and experienced advisor, as they allow their younger generation to take initiative, make mistakes and seek out their recommendations and support as they learn and grow together.” Bouchard also feels that having clearly defined roles and responsibilities that the next generation can build skills to prepare for is essential. “They need to know the qualifications for the role they are interested in pursuing, and also performance standards,” she said. Carmen Bianchi is a family business consultant, president of Carmen Bianchi Family Business Associates and founder and director of the EMC Business Forum at San Diego State University. She agrees that in order for the transition in leadership to go well, it’s best to have everyone on the same page from the get-go. She often recommends and serves as a facilitator for family business retreats where the whole family participates and feels part of the process. In cases where more than one child might be interested in the leading role, Bianchi recommends the owner insist each gets formal training, which could include completing an MBA, and then seeing who rises to the challenge. In the meantime, an interim CEO could be placed at the helm.

1. Ignore the transition. There’s always the potential risk of a crisis-triggering event (untimely death, incapacitation, accident or illness) that would capsize the potential succession. 2. Go it alone. Have professionals on your team to facilitate the process and bring their skills and experience to the table. 3. Wait too long. Business owners immersed in the day-to-day have a tendency to put off strategic matters such as succession, figuring it will resolve on its own. Remember that time and chances are the allies of crisis. 4. Be closed-minded. Having an open mind to creative solutions from professionals can help architect a successful succession plan unique to your business and desires. There’s also a hidden benefit of a plan: it helps you reduce the fears you may have in letting go. “I recommend honest and open communication upfront with one another to help understand the anxieties, fears and risks of moving forward with the plan,” said Wimer. “Get these on the table first to identify risks to mitigate, and then the benefits and value to executing the succession plan will become clear. I recommend using a business advisor to facilitate these discussions early on, before engaging the other professionals, so that a solid foundation is built for the succession plan to be crafted.”

“When they go through the education, often they learn their own limits and interests,” said Bianchi. The person who thought he would be interested in the CEO role may realize his skill sets are better suited to head up another division of the company. Continued on page 38 

www.retailerNOWmag.com

APRIL | 2014

37

April 2014—Family Business  

This issue tackles a lot of the challenges that come along with owning a family business.

Read more
Read more
Similar to
Popular now
Just for you