Leadership April 21, 2016By: Anthony Pollino

Family-Owned Businesses: Transitioning to the Next Generation

C-leveled has worked with many family-owned businesses, on a variety of different topics, ranging from forecasting, market expansion and exit planning. Far and away, the most challenging issue that we have worked through with business owners centers around a transition from the current generation to the next.

Financial forecasting is as clinical as business gets; market expansion entails identifying company and product/service attributes that can be differentiated in new channels and market sectors; exit planning focuses on setting targets, establishing timelines and valuation mathematics. A generational shift is all of those things, with an additional dimension. When a person or a team do anything for 40 years, they understandably become ‘attached’ to processes, outcomes and ultimately personally identify with the business. Understanding the emotional vector, and leveraging/accommodating that is oftentimes the key to embarking on a successful and gratifying generational transition plan.

The new crew has new ideas, but understands that the business has been successful. The incumbent crew has been successful, but understands that the pace of change is accelerating. Bridging that gap in a way that leverages the strength of legacy and with a thoughtful integration of change management provides the basis for a successful hand off of the baton.

It’s not easy, for the existing or new leadership groups.

Many owners who embark on a hand-off process convey their total support for the action, speak proudly about the attributes of the new team (who generally are the owner’s children and siblings) and are quite convincing in their expressed intent. As the conversations begin though, we often see an underlying resistance to actual behaviors when drilling down on the who-will-do-what in the new leadership team:

“I just don’t see the value of aggressive marketing.  I know all of our customers personally, and they buy because they’ve known me for 30 years.”

“I know that Dad, but more and more, the buyers we work with are 30-somethings, who find new products and services using the web and social media.”

“KPIs? I know everything that’s going on in the business.  It’s all ‘up here’.”

“Without a financial plan, and measuring performance against that plan, we won’t know if we’re making the progress we’ve targeted.”

“People here are loyal.  Many of the people have been with me for 20 years.”

“That kind of loyalty is great, for sure.  But some new blood would bring new ideas into our company.”

And on, and on.

What is really being communicated here is a concern that the new team will completely abandon the foundational values that drove historical success. The best way to overcome that is a collaborative business plan that architects a transition plan that is easy to understand, that is implementable in a phased fashion and lends itself to being measured.

In our experience, once a level of trust in the process is established, the emotional aspects of a transition give way to a productive ‘management team’ atmosphere that can focus on business growth, an actionable plan forward, and an exit strategy for the existing ownership that integrates their personal goals and supports the new team in its efforts to expand the enterprise.