Retailers oﬀer plenty of reasons why they don’t plan for their future Our three-part series wraps up with a few more By Wayne Rivers
ummer is heading for the homestretch and so is our summer series in which we address why family businesses fail to do succession planning. You can check out the first two columns in this series in RetailerNOW, but here’s a quick recap of last month: One of the biggest reasons families fail to plan is because they feel it’s not urgent. If you’re healthy with employed children, my guess is succession planning is the least of your worries. That’s how it should be, but it should not be ignored. This month, we’ll address three additional rationales for failing to plan. Do any of them strike a nerve with you and your store?
1. Senior generation family business leaders don’t know how to be fair to their non-employee children relative to their employee children with respect to their inheritance. A poll we did years ago identified that 80 percent of family businesses had children in the business, and 80 percent also had children not in the business (there is, of course, some overlap in the answers). There are two schools of thought here, and the proponents of either school would say the other side is all wet. The first side says that only employee family business members should own stock in the company. Non-employee family members should be compensated in terms of their inheritance with non-business assets like cash, insurance proceeds, or real estate. The other side says, “I have four children, and, while one is in the business, I love them all equally; therefore, I’ll split all my assets into one-fourth increments, and my children will inherit share and share alike.” Depending on which family business advisors you talk to, you
AUGUST | 2016
may get a very strong opinion on one side of that argument or the other. Here’s a dirty little family business secret: Either way can work equally well! As long as the family goes into ownership succession planning with their eyes open and understands the pros and cons of the two most widely accepted methodologies, either can work. They just need the right structure and safeguards in place.
2. Family businesses see succession planning as an event—not as a process. According to an unpublished study by Dr. Jim Lea, family businesses that allowed 10 years for their succession plans to take root and go into effect were far more likely to enjoy business success 15 years later than firms that allowed five years or less for transition. The secret to succession planning, if there is one, is to allow enough time for the plans to work. There will be fits and starts, joys and disappointments, successes and failures, and home runs and strikeouts throughout the succession process. But the main thing is to recognize that it is a process with easily identifiable steps and milestones. What succession is NOT is an event. It’s not Dad announcing on April 1st that he’s retiring and will be out the door December 31st. It’s Dad, Mom, the adult children, the in-laws, and the key non-family employees coming together to develop a common vision for where the business ought to be in 10 years and then crafting a step-by-step plan for getting it there. Succession is a long-term project like any other; there is a beginning, a middle and an end with plans and contingencies for each step and fairly predictable challenges along the way. Done correctly, every component of succession planning utilizes and builds on that which has gone before it.