Letting go is hard, but it doesn’t have to be painful. Blue Pearl President Joel Freimuth gives family-operated businesses a lesson on how to create a smooth hand-off.
In the case of family-operated businesses, there has been a growing conflict of interest when it comes to handing down the keys. Often, the sense of reluctance stems from the generation gap and the fear that passing over roles and responsibilities will alter the entire business model. Baby Boomers are undoing their legacy and leaving a botched business for their millennial successors to fix. It is not exactly breaking news that the older generation is having difficulty keeping up with the younger, faster and more technologically advanced generation. There are many things that Baby Boomers can learn from their Millennial children, but even more importantly, the predecessor must be willing to teach the up-and-comer to create the smoothest hand-off possible.
Here are some tips on how to avoid the common issues when transitioning a business from one generation to the next.
Don’t Be Confined By Family Obligation
Feelings of obligation are present in every family and are especially prominent in a family-operated business. Before considering entrusting ownership to the Millennial, the Baby Boomer has to decide if he or she is handing the business over due to feelings of obligation or because the Millennial is truly the most worthy candidate. Obligation is also a factor when it comes to the operation of the family business. Will the Millennial run the company in the same way that the Baby Boomer ran it because the Millennial feels obligated to run it that way, or because it is the right way? Collaborating early in the process on this issue can mitigate problems before they even arise.
Avoid Procrastination, Train Early (Train Early and Hand over The Company Smoothly)
Today, the younger generation is undoubtedly capable of running a company more efficiently than Baby Boomers in many respects. Yet, there has been a consistent trend of the successor having to wait until a parent is no longer around to gain control. This is delaying the career start for the eager successor, which can reflect negatively on the business in many ways. Baby Boomers must be willing to relinquish control and handover the keys to the company before they antiquate themselves out of the lead role.
Clear Divide: Relationship & Business
In terms of succession planning, it is imperative to instill a hard line between how a child is raised and how they are taught to run a business. As children age, they will begin to possess traits of their parents, who are the most prominent role models they have had. This especially happens in the heat of the moment. Despite this, when a child finally takes over the company, many parents will continue to step in—especially if the model has been changed. Mentoring the prospective business owner on ways to interact and react before the takeover will ease one’s mind once it is time to loosen the grip.
Listen To Each Other and Be Willing to Compromise
The dynamics of a family-operated business can be complicated, and as in any business, the idea of leadership may get convoluted. Many people have a difficult time hearing suggestions and criticisms, especially when it comes from a relative. In a family run business, it is important to hear each other out and take all criticisms constructively. An essential aspect to this is trust. The Baby Boomer and the Millennial have to trust each other, and both party’s concerns need to be taken into consideration.
Transitioning out of a family business is, without question, more difficult than retiring from a company without family ties. An abrupt retirement from a family business could create hard feelings and put an unnecessary amount of pressure on the Millennial moving into the CEO position. The best way to leave a family business is slowly and smoothly. The Millennial should be included in executive decisions before the Baby Boomer has officially retired. This way, the Baby Boomer can leave confidently, knowing that his or her company is left in good hands. This also gives the Millennial confidence in his or her new role as the company’s leader. Once the Baby Boomer has officially retired, he or she should still set weekly meetings for an extent of time to make sure the Millennial is sufficiently adjusting to the new position.
Taking Back Control Can Lose Customers
It is safe to say that many Baby Boomers are control freaks. If power in the company has been transferred smoothly, then this personality trait will not be an issue. However, too often, parents are handing over control to their children then quickly taking it back. Not only does this cause confusion to current and potential customers, but it also muddles the general structure of the business. It can be difficult to watch a son or daughter make mistakes, but helping them up and dusting them off is the preferable strategy rather than taking back the power and setting the family business back.
About Joel Freimuth: Joel is the President of Blue Pearl Consulting Firm, founded in 2011. Blue Pearl is located in Chicago, IL, and specializes in creating, implementing and maintaining strategies to assist its clients in reaching their stated goals. Blue Pearl services two main types of clients: Industry and Medical.
Joel has years of experience and expertise in management consulting, financial analytics, business development and strategic planning. Joel graduated from Emory University with a BA in Mathematics and Economics. He went on to earn his Juris Doctor (Doctorate) from the Loyola University Chicago of Law.
About Blue Pearl: Blue Pearl Consulting brings world-class research and analysis to bear for its mid and smaller mid-market companies. Blue Pearl Consulting assists businesses in finding the best path to achieve company goals. It was featured in Businessweek and various esteemed publications for its services.