Many business owners want their business to stand as their legacy and leave it to their children. The transition in leadership from one leader to the next is always difficult, no matter what the situation is. It’s even more difficult when the new leader is the owner’s child.
In order to help make the transition better, there are a number of steps the owner and the family can take.
First, the child should work outside the business for a period of time. I recommend at least four years, and longer is better. By working outside the business, the next leader can gain valuable experience prior to coming into the business. This will give the next leader greater credibility when they come into the business, valuable insight in how others run their business, and many times they will have a much better work ethic than if they just start in the business.
Secondly, there should be a program developed for the next leader to learn the business. If the business is complex, the program should be extensive. The program should include a period of time in each of the major divisions with the new leader both observing and doing the actual work. The purpose of the development program is to both learn the business, understand what it takes for the employees to be successful, and to gain credibility with the rest of the management team and employees. The best learning is done experientially and the new leader must gain as much experience as possible. I even recommend that if the business is complex, the new leader spend some time in the accounting and finance area to gain a better understanding of the business’ finances. While working in the various divisions or departments, I’ve seen that the next leader can bring additional resources to solve problems that might otherwise get pushed aside.
Finally, the owner must understand their own transition out of the business. While it’s easy to say you’ll let the next leader take over, it’s much more difficult to let them lead and make decisions while still actively involved in the business. Consequently, it’s best that the next leader gradually assume responsibility for greater areas of the company. This means that the owner must allow the next leader to make run the area, make mistakes and learn as they go. The owner must come to grips with their transition as they’ve frequently spent their entire life in the business. Letting go is extremely difficult and the transition plan must consider the owner’s needs.
As stated in Part 1 of this discussion, the owner must plan their exit from the business and consider their numerous objectives and needs. It requires a skilled advisor to assist the owner in creating and working their plan which should include personal and corporate financial issues and leadership challenges. Be sure you get the best assistance to increase the likelihood of a successful transition. Contact me to learn more.