I wanted to share with you the notes I took from the breakfast presentation we recently held with guest speaker Enette Pauze PhD, FEA www.level8leadership.com. 

Family businesses the world over experience some form of succession decisions—it’s tough to know when to hold on and when to finally pass the torch. Business succession has to happen eventually, but the difficulties are more in what precedes transitions rather than changeovers themselves.

Family-owned businesses make up a large part of the North American economy and according to the National Bureau of Economic Research Family Business Alliance, 43% of family firms do not have a succession plan in place and only 12% of them make it to the third generation.  Reasons are bred from owners not feeling confident in ensuing ownership and accountability issues. But more so, succession issues arise from lack of trust and breakdowns in communication.

If you’re feeling unprepared for a conversation about family business succession, it can often be amongst the most uncomfortable discussions to have. But to solidify longevity of the family business and to keep family relations comfortable and robust, these conversations are necessary to start early. The following are common obstacles in the business succession process and suggestions for seamless conversation.

Why Do Families Avoid the Succession Conversation?

Apprehension of a succession conversation emanates from a broad spectrum of reasons. Parents may not feel that capable hands are waiting to catch impending responsibilities, or children may not be interested in the business at all. Any discussion that arouses feelings of parents or family members getting older and facing eventual mortality is hard, and there may be family members involved in the business that some don’t particularly see eye-to-eye with. Maybe fear of unknowns is what’s preventing discussions, or fears of hidden agendas. Ultimately, there are five common reasons.

Fear

Fear of gaining something you do not value.  Fear of the loss of something you do value.  Fear of the loss of relationships, are just a few of the examples of how fear can prevent a discussion about succession.

Unrealistic Expectations

Having unrealistic expectations about the conversation can make all parties on edge, and ultimately, when we assume a conversation will go one way, it often turns out differently. Conversations cannot be controlled, and it’s tough to know how and when to have the discussion—there’s never a perfect moment or a best time for everyone.

Lack of Urgency

Unless there is a cataclysmic event that inspires discussion, there’s no pressing urgency to talk about matters—especially if business is carrying on as usual. You and other family members may be thinking “why now?” or the all-too-common “I’m too busy this week.” Often, the weeks turn into years, and the conversation is now too late.

The best time to start a family discussion is 30 years ago, the next best time is now.

Lack of a Container

Containing factors are often missing when we feel extreme apprehensive to begin family discussions about business succession. If there is no structure around the conversation, some won’t feel safe or comfortable enough to bring up matters.

Business as Usual: Newtons Laws

Newtons Law states that for every action there’s an equal and opposite reaction. A body (business) in motion tends to stay in motion unless an outside force is applied to it.  For a family, they have to overcome inertia in order to get the conversation started.  

How Can a Family Start the Conversation?

While it’s never going to be the easiest conversation to have, there are many mindful methods to reinforce seamless family business conversations.

Identify Easy Conversation Starters

Once you’re in the conversation, exchanges occur naturally; it’s initial moments that make for tight nerves. A few icebreakers that can help lead into discussions are as follows:

“I noticed that we haven’t talked about…”

“I’m really curious, does anyone notice that […]. How do you think our family is doing?”

Create Conversation Containers

A well-formed container can act as a protective gavel. An example of a container can be a routine, some type of governance, or strict communication guidelines when talking with families about sensitive issues. If anyone has a question or comment, there would be a process and code of conduct to follow in communications. A code of conduct can help mitigate fear of hidden agendas and can collaboratively outline rules of engagement, avoid conflict, and harmonize decisions.

Also helpful in this arena are regular family meetings, drafting a family constitution, and encouraging all parties to be more inviting of conversation.

Make Your Top 10 List

There are often a lot of moving parts and many key players within family businesses. Instead of going straight to the source, make a top 10 list and begin with those you determine are most ready to have the conversation, and slowly bring others into the fold.

Define Shared Priorities

A shared priority is a common goal that unites the entire family, and it’s bigger and stronger than family fears. It may be family goals, values, open communication, an annual vacation, etc. Narrow down that common denominator that helps to bind the family together, and use it to be the flint that sparks forward-looking conversations.

Alter Perceptions

Perceptions and unconfirmed assumptions can be what suppresses communication. That said, understand that your partners or future partners are likely loyal to themselves, and this could be driving their personal actions, behaviors, and results. Beginning the conversation begins with what is most important and meaningful to other parties involved. Determining what matters to them and how they can reap rewards will gain their interest, but don’t always assume or distrust individual agendas.

Collective Best Interests

The conversation has already started in everyone’s minds. Each family member is having internal dialogue, possibly quite similar to yours. Know that it’s in everyone’s best interest to start the conversation, then, share the idea with family members. Stating “I know we are all thinking about this, so I think it’s in all of our best interests to discuss…” removes the notion of hidden agendas, and you assert yourself as a firm leader.

Questions to Foster Communication

Conversation starters are a must, but a prepared list of questions can help ease tension and will make for reasonable dialogue. Asking questions allows family members to reflect internally.

1. What is important to you regarding family, ownership, and business?
2. If there was an unplanned transition today, what would be the impact?
3. How might life be different if there was a plan and we each had more certainty? Would we feel better if we had a plan?
4. What is it costing each of us to keep avoiding the elephant(s) in the room?

Final Thoughts

Remember to find comfort in uncertainty and don’t rush into decisions. We don’t need to come to a conclusion; all we have to do is begin the conversation. Everyone is going to possess their own thoughts and feelings, as all family members spend their time, money, and lives differently. But we can’t assume that differences will break us apart. Be the hero of the conversation everyone has been avoiding, and make sure to consider all viewpoints and opinions.

 

Enette Pauzé, PhD, FEA, is a 3rd gen family member and leader in business partnerships who has worked with visionary leaders for more than 20 years. Enette pairs her professional and family experience to aid families across Canada, U.S., Mexico, South Africa, New Zealand and Australia, and facilitates multi-family gatherings across several nations. She is a designated Family Enterprise Advisor through the Family Enterprise Xchange.