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Letting go of the business? Any advantage to letting up?

Steve McClure

“It took me long time to understand the difference between ownership of a company and management of a company. Since Dad was the owner and manager I had always thought the two were synonymous.”

This is a quote from the second generation CEO of a family-owned construction firm, Mike Robinson, who today shares ownership with his two brothers of The Alfred Robinson Corporation. Mike wrote this about 10 years ago in an article for our newsletter titled “Getting Dad to the Table.”

Before taking the leadership post and long before getting his dad to the negotiating table to discuss management succession, Mike came to this important realization: his turn as the CEO was going to be entirely different than his father’s.

To start with, Mike would have two other equal partners as owners – his brothers who were also employees in the business. Mike would only control one-third of the shares, and probably take the reins long before he ever owned all of the promised shares. Tax effective ownership transfer takes time and control is seldom passed before the senior generation is financially independent of the business.

Mike’s father Alfred was the CEO, chairman of the board, its sole member, and also the single shareholder. Understandably, Alfred represented the role Mike had grown up admiring and later desired as a job for himself. He did not originally desire it for the power, yet after serving in middle management in the company with lots of ideas for improvements, he saw that the control and position held by his father would eliminate the frustrations in getting his ideas accepted.

In the 15-year history of the Family Business Consulting Group, we have learned some lessons from Mike and Alfred, as well as from others. For the limited purposes of this article, below are suggestions for the successor generation to consider:

1. Pursue a forum and a conversation that will involve the whole family to address family business matters, understanding that Dad and Mom are interested in everyone’s welfare not just the future leaders’.

Family meetings are a place for dialogue about working in the business, roles in and outside the business, including the meaning and appropriate roles associated with ownership. Family meetings are especially valuable when a fair arrangement involves parents who pursue an unequal distribution of ownership among successor owners.

2. Embrace stewardship and servant leadership as values and minimize comments that can be interpreted as control-seeking, power-seeking or convey the message, “hurry-up-and-retire.” How brothers’ and sisters’ interests will be respected by a sibling leader will catch a parent’s ear.

Understanding that there may be more than a little sensitivity on the part of a founder to leaving his or her post, seek to team up and share the leadership load, focusing on the needs of the business and the family. This will be received better than pursuing titles, dates of transition, or threats to leave if expectations about control handover are not met.

3. Separate from the parents; get on the same page with brothers and sisters, and their spouses too, about how to work with the parents toward an orderly transition. If the parents are not yet ready to engage in the discussion, continue on with your siblings, developing a consensus to the question: What do we see as our best solution for management and ownership, and for our family?

4. Take advantage of resources. Other family businesses that have successfully transitioned or are currently dealing with similar issues are great resources, as well as consultants, advisers and books.

5. Collaborate with the founder and the rest of the family to create a rationale for a transition, and more important, a vision or mission for the family as owners of the business. Ask questions such as: How do we see ourselves as a family in the next generation; what contribution will the family make to the business? How will management succession and future ownership serve this vision? What do we hope to accomplish in doing so, and just as important, what do we hope to avoid?

6. Recognize that “letting go” is not usually the issue; it is “what’s next?” for many successful entrepreneurs who start and grow companies. Their company has often been their sole focus for many years, and finding another passion is difficult – yet many do find one when they decide they should.

In summary, the more successors push for “letting go,” the more resistance and mistrust they will generate in return. While not foolproof, many successors have found a collaboration and empathy-with-the-founder approach to be more productive.

This article was written by Steve McClure, Ph.D., who works across North America, has coauthored several books and articles on family-owned businesses, and is a partner in the Family Business Consulting Group. He can be reached at (208) 342-7775 or mcclure@efamilybusiness.com.

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