By Dave Driscoll
Family businesses are a special example of mutual sacrifice and success. Children – sometimes multiple generations of children – have grown up with an inside view of the discussions, decisions, highs, and lows of building and sustaining the business. Despite that insider background, not every child, niece, nephew, or cousin is cut out to take the reins and lead the company in the future.
The popular Netflix drama Ozark offers surprisingly relevant examples. Bear with me, we are NOT condoning money laundering or drug cartels!
In the fourth and final season, the Mexican drug lord Omar Navarro is struggling with handing over the cartel to his heir-apparent, nephew Javi. Omar has built the cartel over decades, managing risks vs. benefits, constructing complex relationships, and playing the long game to insulate the business as much as possible. Javi, on the other hand, does not respect the rules or entangled relationships that are in place. He is impatient, impulsive, egotistical, and doesn’t consider the long-term consequences of his actions. His superior formal business education cannot overcome the fact that he does not have the leadership mindset to guide a business.
In contrast, the children of money launderers Wendy and Marty Byrde, each demonstrate divergent – but equally important – skills learned from their parents. Fourteen-year-old son Jonah quickly learns the technology at the heart of their multi-dimensional business dealings. Then, he improves the system and begins competing with his parents – he is an angsty teenager after all. Daughter Charlotte excels at the relationship side of the business; even in crisis situations, she stays calm, is a team player, and reminds people of the mutual benefit of working together. She also thinks well on her feet to mitigate problems. Her emotional intelligence and maturity for her age make her an asset to the business.
These (somewhat extreme) examples illustrate the importance of careful analysis before automatically passing a family business to the next generation. Grandparents and parents have a notoriously hard time being objective about their offspring. The emotionally-charged relationships between generations – both positive and negative – can dictate a succession plan that would not otherwise be considered logical.
In many cases, one or both generations have assumed the child(ren) will one day lead the business. But have they been properly groomed to succeed at the task? Hoping that the next generation has picked up the necessary skills and appreciation for the finer points of the business by osmosis is a big gamble. That’s an unfair burden to place on the next generation and can jeopardize not only the business, but also their financial security and family relationships.
Unconditional love should not equate to making foolish decisions for the company’s future. As challenging as it is, family successors must be judged by the same standards that would apply to hiring an “outsider.”
When assessing the potential to lead the family business, consider:
- Maturity and emotional intelligence
- Problem-solving skills
- Leadership and management competencies
- Ability to strategically and realistically see the big picture
- Financial understanding and responsibility
- Natural talents, abilities, and weaknesses
- Real-world experience
- Creativity and fresh perspective
- Accountability to the company, employees, and community
Some of these qualifications can be taught with patience and persistence; others are inherent personality traits that won’t shift much. Leaders do learn, evolve, and become stronger, but only with a growth mindset and a willingness to compromise for the greater good.
The younger generation has had remarkable advantages in terms of education, access to information, support, opportunities, global perspective, and frequently, economic security. These benefits can develop remarkable leaders! Sometimes, however, the expectation of instantaneous results and self-focus can lead to restlessness, entitlement, or a lack of grit.
The responsibility of the older generation is to realistically consider each possible successor’s emotional and intellectual fitness to successfully handle the demands of running a business. While transferring the business to the next generation may bring comfort as the “easiest” succession plan, pretending that someone is well-suited for ownership is a cruel burden. An heir struggling and failing to perpetuate the family legacy only leads to anxiety, guilt, and family drama. If the right candidate to lead the company is not a member of the next generation, courageously acknowledge that reality instead of internalizing as failure or letting down the family.
Everyone has unique strengths, talents, and value; the risk-taking, resilience, and strategic vision required of business owners is not passed along through the family’s DNA. Although the consequences are not usually as dire or violent as the drug cartel situation in Ozark, businesses and families are strongest when each person’s authentic characteristics are realized and developed.
Dave Driscoll is president of Metro Business Advisors, a mergers & acquisitions, valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at [email protected] or (314) 303-5600. www.MetroBusinessAdvisors.com
As seen in Dave’s Small Business Monthly column