Family businesses are great. They can also be hard. Many of the companies in the pallet and lumber industries are family businesses. Increasingly, I am seeing new faces as the younger generations take over. Very few founders come to industry meetings or may even be involved in the daily operations of their family businesses. That just happens as one generation retires, hopefully another arises.
I am lucky to have both of my boys working in the business. They each have their own giftings and work in various parts of our publishing company. Scott is vice president of sales and oversees sales and daily operations. Chaille is publisher and oversees the editorial operations of our publications. Scott has been with me since the early days of our business. Chaille grew up around the industry and went to journalism school to work on our editorial development.
One thing I have learned is that the family business may not be for everyone. If you are a founder or second-generation leader, it can be difficult when your children don’t want to be involved or may lack the skills to do what needs to be done. Even if you have good heirs in line, there can still be issues.
What happens when siblings or cousins have different visons for the future or management styles that clash? How can you as the owner gracefully exit and still find a reason to get up in the morning? How is the transaction going to take place financially? After all, you need to get paid for all of your effort in starting or building the company. How do you set safeguards to ensure that family member are true contributors to the success and not just heirs wanting something for nothing? What about long-term employees who are critical to your success and are not family? How can you protect and recognize their achievements?
Lately, I have been thinking a lot about these challenges in my business as well as our industry in general. Many companies are going through these transitions or have just gone through it to some extent.
The worst thing you can do is to put somebody in charge just because they have your same last name. If this person doesn’t want to run the company, he or she will run it into the ground. People do what they want to do. Even if they have a title and a job, that doesn’t mean they will do a job well. Your heart has to be in a family business. Otherwise, you would be better hiring a professional manager or selling the company off.
One thing I believe you have to do is to establish criteria for any family members who come to work for the business. This helps ensure that everybody knows what is expected. I have already developed a fairly detailed will and succession plan. Now, I am in the process of creating some other key documents, such as a family pact and code of conduct.
A family pact is conditions, requirements and restrictions for family members to transfer stock. It also establishes the rules for family members, such as joining and leaving the company, conflict resolution process, compensation guidelines, promotion policies, etc. Succeeding generations can make some changes. Other things may be set in stone as conditions for inheriting or buying shares.
Many family businesses fail because transition topics are not discussed or dealt with in a timely manner. I have started to rely a lot more on my sons, and they are responsible for the daily operations. We are having some of those tough conversations right now, and I am glad that we are having them while I still have something to contribute to our business. I even like when there is some disagreement because I know that passionate people will drive our company forward.
If you have a number of key family members who are currently in or will take key roles in the business as you transition, one idea is to have them each submit a vision casting document for the future. This invites them to dream, gives them a say in the discussion and can help identify issues early before they erupt into civil war. You can decide if this document will be shared or is for your eyes only.
• A good vision casting document likely covers the following:
• Why has the company been successful in the past?
• What does the future of the company look like?
• How can you contribute uniquely to our success?
• What disruptive technologies, trends or customer preferences are changing the landscape?
• What new products or service options should be considered in the next five years?
• What resources need to be secured to help provide for growth?
Only 12% of family businesses survive to the third generation. Failing to plan ahead and have key discussions are two common reasons why things fall apart. What are you going to do to save your company from this fate?
