Discussions about succession planning in family-owned corporations often focus on ways to groom heirs to eventually lead. It may be true that the next generation can gain knowledge by attending a business college or interning at a similar business. But each generation brings different worldviews and values to the board room, and that presents a unique challenge to succession planning.
When profit-driving decisions are based on personal, religious, or ethical values that run contrary to competitive practices, non-family professionals can grow frustrated. The last thing an organization needs is to lose talented administrators and innovators. Success requires a diverse leadership team who can work with family members to ensure their legacy remains intact by leveraging assets and innovations to overcome what appear to be philosophical obstacles. In such organizations, it’s essential to train heirs and select professionals who fit the system.
Examples of Family Value Business Impediments
Many family-owned and operated corporations have achieved tremendous financial and personal success without compromising their values. Some operations close down for religious reasons every week or to observe annual holidays. Annual closures are considering routine in the business landscape. Weekly days off have become increasingly problematic for companies with customer bases who expect goods and services seven days a week.
One example that predates online platforms is the family-owned newspapers that did not produce either a Saturday or Sunday publication. Given that customers preferred a daily newspaper, this Monday through Friday newspaper schedule became a marketing and service disadvantage.
After bringing in industry professionals, innovative solutions were presented to ownership that included producing the then-lucrative advertising-driven Sunday edition in advance. The weekly edition was published with a series of think-pieces and features rather than hard news. Distribution was simply shifted to Saturday evenings, and competitors had a more difficult time encroaching on the family-owned operation’s circulation area.
The point is that family-driven decisions focused on remaining true to their values but were largely detrimental to their longevity and legacy. There are wide-reaching examples in today’s business landscape that include a commitment to sustainable energy, living wage minimums, and environmentally friendly practices, among many others. Success typically requires bringing in industry talents who can negotiate solutions that buoy family values while achieving key business goals.
Preparing Heirs for Leadership Roles
Professionals immersed in a family-run operation typically settle into a certain way of doing business. Even if there are limitations that another organization might not present, either the pros outweigh the cons, or the professional-minded person secures a position elsewhere. The seemingly unique goal-achievement ideas may require professionals to check a few value boxes. And that may not necessarily be a bad thing. At the end of the day, the feeling of success sometimes requires more than higher profit margins.
That being said, the next generation will grow up in a world vastly different from that of their parents and grandparents. Helping them garner a business-savvy foundation early can avert a potentially disruptive leadership shift later. It may be worthwhile to consider old school ways to help heirs develop into respected leaders.
Earning Your Keep Through In-House Internships
Sending an heir off to intern at another company to gain experience seems like a good idea on paper. But in the real world, that heir may be viewed simply as so-and-so’s son or daughter. Preferential treatment from other executives or administrators will likely undermine the experience.
By contrast, starting an heir among the manual laborers or most demanding jobs in the company is a way they can pay their dues. Upper-management and family members will need to ensure the direct supervisor that their job is secure, and they are tasked with making the upstart earn their way.
Management and family members would also be wise to set boundaries. The next-generation leader should work side-by-side with blue-collar workers, eat lunch in the breakroom, or out on the loading docks. Ascending through the ranks offers a rare education in hard work, accountability, and humility that will serve the company well when the leadership succession occurs. Taking the hard road to the top also engenders company-wide respect from the workforce.
Select Industry Professionals with Talent for Cooperation
Corporate America presents wide-reaching challenges. Competition often breeds success as executives compete to find innovative solutions and methods to achieve company goals. While those facets are largely in play at family-owned corporations, team members are also tasked with working effectively with family members. Selecting leadership team members to work cohesively with family ownership calls for traits such as the following.
- Patience is a Virtue: Executives are often recruited for their passion and take-no-prisoners attitudes. Those traits are inclined to cause friction among family members who put values in equal or higher regard than market share expansion and profits. Calm and reserved determination are traits that may better mesh with value-driven organizations.
- Peaceful Communication: It is not uncommon for industry leaders to be effective communicators. Sending out detailed newsletters, emails, and directives help to ensure the company moves in harmony. But when family members interpret their CEO’s or CFO’s memo differently, butting heads about meaning is a non-starter. The ability to gently shepherd all the key stakeholders tends to be more valuable than concise initial communication.
- Realistic Success: Family-operated corporations may not necessarily have the same lofty profit goals as others. Bringing in talented people who understand and accept this subtle difference can help further goal achievement.
Family enterprises typically differ from purely profit-driven outfits on many levels. Success in these organizations generally requires leadership traits that further profit margins and increase market share. Succession planning in family-oriented outfits often requires a balance between heirs and industry professionals who fit the system.
This information is general, not specific, and is only meant to give perspectives on matters discussed which may change without notice. It is not intended to be tax or financial advice. Information has been obtained from various sources believed to be reliable, but interpretations and accuracy are not assured. Please contact us for any questions you may have or to revisit your planning strategies.