Reluctance to deal with succession is not limited to the founder and his or her family. Managers, owners and outside stakeholders may be equally hesitant to grasp the nettle. This article looks at each of these groups to explain why.
I am referring here to the non-family cadre of managers who constitute the upper echelons of the business. These are often people who have worked with the founder from the start of the business.
Many senior managers are reluctant to shift from a personal relationship with the founder to a more formal relationship with his or her successor. In most cases, these managers have developed unique ties with the founder that extend well beyond the parameters of a contractual work arrangement.
Over the years, the founder may have personally managed these senior managers’ training, evaluation and compensation, and tendered personal favours to them. For many senior managers, personal ties with the owner constitute the single most important advantage of having worked for a family business over the years.
In addition, the founder’s succession may confront older managers with the reality of their own ageing and retirement. Given these reasons, where the founder and the younger generation are locked in a struggle for control, older managers not infrequently side with the founder in favour of the status quo.
The families of senior managers may also have personal ties to the founder and his family, so that the shifting hierarchy in the founder’s family may trigger changes in the families of senior managers. In many cases, several members of a single family are employed by the company, so a change in leadership can threaten the employment of these families as well.
In some larger family businesses, younger professional managers with shorter tenure in the company hold senior managerial positions, and they may aspire to formalise the structure of the business. These managers are often eager to purge the business of relatives of the owners and the other managers, feeling that these people are not contributing to the growth and development of the business.
Finally, in the eyes of some older managers, a successor is seldom or ever able to replace the entrepreneur, regardless of the younger person’s competence and skills. This basic prejudice may lead them to resist implementing a transition. It’s not unusual, therefore, to find senior managers colluding with the founder and members of the family in avoiding serious discussions about succession.
Along with the family and senior managers, the owners also have difficulties in addressing succession planning. In many first-generation family agribusinesses, the founder gives or sells some ownership interest to older managers, relatives or both, in order to incentivise them to contribute more to the business. In these cases, the founder typically retains ownership control of the business.
In larger companies, the founder often secures the financial backing of outside investors, who are then given a share of ownership in return for their investment. Typically, these investors are old friends of the founder and themselves owner-managers of other family agribusinesses or companies.
Like other stakeholders in the family business, the owners, in whatever capacity they serve, also experience difficulties engaging in or mobilising the succession planning process.
For owners who work in the business, whether they are family members or not, the difficulties typically stem from the way in which they acquired their share of ownership.
Often, the founder has passed along some share of the ownership to these individuals as a paternalistic gesture of goodwill or in recognition of some special contribution that they either have made or are expected to make. However, this gift or sale carries with it an implicit expectation of loyalty and allegiance to the founder that makes it very awkward for internal minority owners to raise questions about succession planning without appearing to be disloyal.
Outside minority owners who are old friends of the founder are often involved in resisting succession planning with their own businesses and as a result tend to avoid discussions of succession planning altogether.
As one founder put it: “The moment I announced that I’d finally decided to do something about succession, my partners and business colleagues jumped on me and told me I was crazy. They inquired whether I’d received bad news from my doctor. It took me a while to figure out that what I was doing confronted them with their own succession anxieties.”
Not all founders have the wisdom to separate their own anxiety about succession from that of others. The problem of succession is a generational issue that confronts all members of the same cohort at about the same time. The reluctance of the founder’s partners and peers to face up to succession often reinforces the founder’s own resistance to planning his or her departure from the business.
Resistance to the succession planning process is not limited to individuals directly involved with the family agribusiness. Outside stakeholders also create barriers to the process.
These entities usually consist of clients and suppliers who have grown dependent on the founder as their primary contact in the family business. They know that the founder is the person to whom they must speak when they want action. Although it’s clearly in the client’s long-term interest that the business plans for its healthy continuation, clients and suppliers worry about losing their connection to the top, and frequently side with the founder in avoiding the effort to plan succession.
The wrong message
It is worth noting that, as a rule, our cultural values don’t support leaders who plan their succession.
We hear regularly of bitter corporate succession struggles, yet that is often where the discussion begins and ends.
We also tend to hold stereotypes of legendary leaders who have “died in the saddle” or “gone down with the ship”, not of leaders who have thoughtfully planned their exit. Perhaps our own collective ambivalence toward authority interferes with our ability to come to terms with the fact that leaders don’t just fade away. They die!
In this context, succession planning is often seen as more of a sign of weakness or character deficiency than as a component of responsible leadership. Since founders view themselves as centrally responsible for the well-being of their families and their businesses, they don’t take such cultural messages lightly.
Trevor Dickinson is CEO of Family Legacies, a family business consulting company. Visit family-legacies.com.