Based on a True Story
When you spend a lot of time in the wonderful world of family enterprises, you hear all sorts of stories, many of them entertaining and sometimes even instructive.
This is a true story that I recently learned more details about, and thanks to the way the patriarch shared the details, it also includes a wonderful contrast that we can all learn from.
The setting is an annual awards evening for local family businesses, for which I had the privilege of acting as the MC.
I had also been part of the jury that evaluated the applications, interviewed the finalists, and selected the winning family.
Transition # 1 : From G1 to G2
Part of the celebration that evening involved viewing some fantastic videos that had been made this summer at the place of business of the three finalists, and included candid clips with every family member involved in each business.
So while we had learned a great deal from the applications and our evaluation interviews, there were some new nuggets of information that came out that evening.
Some of these came from the videos, while others were revealed during a fireside chat with one family member from each of the finalists.
It was during the video that the patriarch from the winning family shared that when his father, the business founder, brought him into the business decades ago, that whole transition lasted “about 15 minutes”.
So about a decade ago, when he began to think about the next generational transition, where he would be the one planning his exit rather than his entry, he was trying to think about the appropriate timeframe.
When some advisors told him that ideally such transitions happen over a ten-year period, he was dubious and could not imaging why it would ever take that long.
During his acceptance speech, he confessed that ten years was, in fact, a very appropriate amount of time to do things right.
It seems like both these transitions could actually be deemed “successful” though, so what’s there to learn here?
I’m glad you asked.
Short and Sweet – Yes, That CAN Work
Let’s start with why the first transition above actually worked, because there are a couple of key details one might miss.
The first one is that the founder had grown the business to the point where he was no longer able to handle it, and was beginning to feel overwhelmed and in need of help.
The second key is that once his son arrived and Dad recognized that he had greater ability to lead than his old man, Dad got out of his way.
This doesn’t typically happen, especially with business founders.
I have a client in a similar situation and there’s another parallel between the situations that’s also worth mentioning.
The first generation built a relatively small business, so the next generation was taking over something that was actually quite simple.
In the case of the award winners and my client, the business is now way too big and complex to hand over quickly and easily.
Slow and Steady Wins More Races
Once the business achieves a certain size and complexity, there are a lot of things that need to be brought into consideration.
When you think about any large business out there, what are the chances that the best person to run it is actually a descendant of the founder?
So if you’ve decided that you’d like to have your offspring take over your business, eventually, then it’s usually better to give yourself a long runway.
Time moves pretty quickly, and it’s much better to be ready too early than too late.
There’s More Than One Transition
A big reason things take long is that you’re not simply handing someone the keys to the front door.
You need to transfer your know-how and knowledge, as well as your contacts.
The leadership that the new person in charge, or more likely the new people in charge, will require, does not shift very easily overnight.
You need to plan to transfer authority and responsibility as well, which are not as easy to do as you might think.
There’s likely some ownership that will be changing hands as well, and that alone will take some time and getting used to.
So if you have a choice, better plan for a ten-year transition, not 15 minutes.