Judging by the comments we received, our recent article ‘passing on trust’ struck a chord. That article concerned the challenges which businesses face when starting to expand and take on employees. This article explores another challenge for businesses, handing over the leadership reins.
In this article we are going to primarily concentrate on family businesses but many of the scenarios could equally apply to founder-leaders when the time comes for them to take a back seat and passed the leadership challenge on to the next generation. And we’ll start with a leadership quote from the Monty Python team; “there’s no place for sentiment in big business.”
Well actually there is, and the people aspect of business is becoming ever more important as the organisational cultural imperative moves from an industrialised product base and towards a differentiated innovation base. But the reason that this quote is so apt when looking at the handing over of a business to the next generation is that it acts as a warning to business leaders to choose the most appropriate person, rather than the most favoured person.
Of course, for any business leader worth their salt the most appropriate member of their family will have been identified quite some time ago and will already be well trained in the aims and values of the organisation before the time comes for the leader to step down. But nothing is simple in business, particularly when families are involved, and as various children, cousins and other associated relatives get a whiff of potential power the infighting and the pressure can become intense. Perhaps that’s why statistics show that only around a third of family businesses survive into the second generation with just over 10% surviving to the third generation.
Let’s face it, the drive and the passion and the ambition which set up the business in the first place belonged to one individual and, family or not, there is nothing saying that successive generations will have the same level of passion and insight. Even in a business such as farming which is seen to be as much a vocation and a way of life as it is a business there is no guarantee that your children will want to take on that lifestyle. So the first lesson is to be realistic; to understand that if there is no one interested in taking over the company, the business should be restructured so that it can remain in existence with leaders drawn from the wider business sphere.
The second lesson is perhaps harsher. There may be those from within the family who are interested in taking over control of the business but whose attitudes and expectations are so wide of the mark that realistically control should not be handed to them. And this is a difficult judgement call to make. Just because someone’s ambitions are different to yours does not mean that they will ruin the business. On the contrary, sometimes bringing in new ideas and new visions can give a business a new lease of life. Unfortunately, sometimes a leader who is strong in their beliefs will choose someone as a successor who shares those beliefs rather than someone who will take the business onto a new level.
Naturally you want to promote the ethos and the culture which you have built up over time but nothing stays the same forever and strong leaders know that business culture has to flex and change if it is to remain relevant in the marketplace. So choosing a clone may be good for continuity but it may be the worst choice you can make for long-term survival. The trick here is to follow the Monty Python advice, to set family sentiment and personal pride aside and to consider what would be best in the long term for the business, employees and customers. Only then can you best ensure that the business which you have built up will succeed into the next generation.