Jonathon James (JJ) the Third had a successful copier company he had built from the ground up. When he was ready to retire, he split the company in half and gave one territory to his son JJ the Fourth, the other half to his son-in-law, Patrick. The problem was, the youngest JJ hadn’t paid any attention to the family business. In 10 years’ time he was still making ends meet, only slightly smaller in scale than what he had been handed. His brother-in-law on the other hand? Well, Patrick more than doubled in that same time frame.
It didn’t just make for awkward family gatherings, it also brings up some valuable lessons about running (not ruining) a family business.
- Records Matter
If you built a family business, you cannot assume that everyone else was paying attention to how that was done. A successful succession must include capturing your hard-earned know-how. Write down successful actions, which, depending on your business may include:
- Details of day-to-day operations
- Tips for hiring qualified personnel for your business
- Successful strategies for marketing and promotions in the past
- Any needed details of handling key clients
Apprenticeship may sound like a thing from the Dark Ages, but in actuality successful apprenticing of the next generation, combined with excellent written descriptions of business best practices, can make for a smooth succession.
- Leadership Matters
One of JJ the third’s biggest mistakes? Failing to see that his son had no interest in running the family copier company. Based on that lack of interest, his employees also lacked faith in him. Good succession involves observing who has the true potential for replacement. An objective review of qualifications such as education, problem-solving ability, performance history and interpersonal skills will help with the decision-making process.
Other family members and even employees naturally resent nepotism and arbitrary leadership succession. Even monarchies don’t always pass to the “oldest son,” and so an objective (ideally, even transparent) succession makes for a smoother transition.
If you inherited a family business and, in retrospect, realize the decision may have not been objective, consider rectifying the situation. With open and honest communication, you can reach a solution, such as:
- Sharing ownership with another family member
- Splitting responsibilities with another qualified family member, according to individual strengths
- Hiring an external resource to manage the business, but remaining on as owner
If you put the needs of your family business ahead of other concerns, you will find a leadership succession that works.
- Balance Matters
Many successful family businesses continue to grow when they find balance between old and new operations. New leadership can learn from the successful actions of the past, but look to the challenges of the future. Striking such a balance is often the greatest challenge of an organization of any size: how do you keep up with changing technology, while honoring the practices that built a company?
The next generation should take it upon itself to find that balance. Some keys include:
- Looking to past leadership for mentorship
- Speaking to long-term employees of any position to find out what has worked in the past
- Capturing successful actions and best practices in writing
- Making short and long-range plans to guide your business forward
- Trying new things, but being willing to give them up if they do not work
- Recognizing and rewarding talent within your organization
The Future Matters
When you look at these three key areas, you can help your inherited family business grow and thrive, and pass it to the next generation all the stronger.