GROVE: You emphasize collective thinking and decision-making. How important is this in your field?
Davidow: It's critical to success. I make it clear up front that in order for this process to work, I can't simply be a mouthpiece for the senior generation or any individual. For example, if the patriarch anoints the next leader that person won't always have the buy-in of siblings. Decisions must be made, and owned, by consensus with transparency and discussion.
GROVE: How long is the typical engagement?
Davidow: Probably an average of 18 months. It takes about nine months to identify and facilitate the behavioral changes that are needed and another nine months to internalize the behavior and have it become systematic and habitual.
GROVE: Generally speaking, why do most families hire a family business consultant?
Davidow: By definition, family-owned businesses are relationship oriented. It's easy for them to fall into relationship protection rather than result-driven decisions. Some families find me when they're in crisis. A typical example is a family dealing with the unexpected loss of a patriarch who made all the decisions. Without an alternative decision-making process in place things can become chaotic. Some family members are paralyzed and do nothing, or too many people do too much. Most of our engagements are more forward-looking. For instance, the business is OK but the dynamics are problematic, and sustained performance may be at risk due to family issues or families want assistance with succession planning.
GROVE: What does succession planning entail?
Davidow: Essentially it's a question of how to best pass authority and responsibility for the business to the next generation. This includes making decisions about ownership (who gets stock and how much?) and management (what happens to the current regime?) They're two emotional issues, but two separate issues that can often overlap and complicate things during the planning process. There are simple solutions for succession. It's important to remember that legal control and family control are two different things. Good estate planning can transfer control of the business to G2 now even though it still resides with G1 in practice. Good succession doesn't change authority while authority is alive. Implementing the plan is when the real work happens. This is the number one issue with family-owned businesses.
GROVE: In your estimation, what's the biggest issue between G1 and G2?
Davidow: I've seen a lot of evidence of the communications disconnect between two generations, especially surrounding succession. In fact, I think you and Russ [Prince] uncovered it in your research with family businesses that failed after a transition from the founding generation to a younger generation. The patriarch's perspective is "they didn't know what they were doing" and G2 invariably says, "I wasn't appropriately trained." When a patriarch transitions out of day-to-day management, it sometimes requires a change in how he or she relates to the business in order for it to survive.
GROVE: Have you noticed any changes in recent years in how families address their problems?