Appoint an objective, fiduciary board of directors. Founding owner-managers often fear that a fiduciary board of directors will tell them what to do and interfere with their running of the business. But owners need a fiduciary board as an insurance policy. If the owner dies unexpectedly or becomes incapacitated, the next generation will need to make tough decisions about the future of the business and their role in it. The board will have the legal power and responsibility to name a successor or interim CEO and to oversee strategy, acting for the benefit of the shareholders.  If the board knows the family and its vision, and has an effective working relationship with the next generation, the emergency succession will go more smoothly. Moreover, if a young family member joins the senior management team, the board will serve as a bridge between generations, overseeing the transition process and providing guidance and perspective. Sometimes, young family members will follow a board’s advice more than they would that of a relative.

Encourage children to work outside the family business. It’s considered a best practice for kids to gain outside working experience before joining a family business.  There is enormous benefit to working for someone else. Young employees learn job skills and gain perspective from someone they don’t call “dad” or “mom.” There’s another benefit: Working for a non-family member can help a child who might previously have sworn never to go home to the family business to recognize what a great opportunity going home might be. It is like valuing a graduate degree: The quickest way to learn the value of an advanced degree is for a young person to work someplace where he or she is the only person who doesn’t have one.

Avoid becoming too entrenched in the business. Working lives are getting longer, with many owners capable of running a business well into their 70s and even 80s. But think carefully about how this impacts the future of the business. Staying in the big office too long can thwart the ambitions of talented young family members. They will pursue their careers elsewhere if that happens. Where talented, capable members of the next generation are interested and prepared to step up into senior roles, founding owner-managers may need to step aside and create new identities for themselves.  

Practice joint decision-making. It’s best if young leaders can practice running the business while the founder owner-manager is still around. That lessens the chance that their mistakes will have serious consequences. The owner also needs to recognize that decision-making becomes more complex as the business grows, as the family expands and as the number of stakeholders increase. Just assuming that the next generation will “figure it out when the time comes” sets a bad example for future leaders and also almost ensures chaos during the transition period. All parties will benefit from working together to articulate policies and procedures for governance and decision-making before the succession plan kicks into action. 

Amelia Renkert-Thomas is joint managing director at Withers Consulting Group, a New Haven, Conn.-based family business consultant with offices in the U.S., Europe and Asia.

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