Succession is a hot topic, and it always is for family business. Fifty percent of family businesses are going to go through some leadership transition over the next ten years. That’s a lot of new leaders that have to be prepared to pick up the reins.
Most of the focus that I’ve seen has been on developing one or more successors and then choosing among them. That is obviously one part of succession that a family or a company needs to managed, but more difficult is preparing the incumbent for retirement.
All of the skills that this person has cultivated in the corner office over a lifetime are important skills, and necessary for leadership. But those same skills and attributes are terrible for stepping back for retirement. You need the opposite skills to step away and retire from the corner office.
Let’s look at the two-pronged approach that’s needed for a smooth transition.
1. Developing the successor’s ability to lead
There’s no disputing it–finding the right successor and preparing them for their new role is critically important. But the departing leader needs to keep in mind, and the board too if they’re involved, is that you don’t want to develop an individual to replace the skills that the incumbent has today. Those skills have gotten the company to where it is today. But those are not the skills that you’ll need ten years down the line. You need a very different set of skills to grow the company over the next ten years. You need to think strategically about where you need to go, and what the challenges or opportunities are, and then select somebody who has that skill set or who can grow into that skill set. The incumbent should not be looking for the person who looks most like themselves.
2. Developing the incumbent’s ability to step back
A driven and highly engaged businessperson, who has led the family and the company through decades of challenges and victories, may not be able to step away without preparing him or herself for life after retirement.
I saw this in my own family’s business when my father stepped down. He made a point of cultivating a life outside of the family business. He was very deliberate about this. He picked up a hobby, woodworking, and he also followed on his passion for helping others in the business community. He bought a building and worked with the economic development community in the region to get connected with people who needed help. He has now found angel investors, and is using his business expertise in a way that is meaningful for him and is making an impact on his community.
My father was wildly passionate about our family business and felt that all of the employees were part of his extended family. He had to be deliberate to be able to step away from it in a productive way that leveraged his talents.
In the past when we would talk about him retiring, I could not imagine how he would walk away. The business was the fourth child at the dining room table every night. We talked about it all the time. He was so connected to it. It was so hard to think of him having to give it up, given his passion and love for it. I really admire that he did it in such a positive way. And he’s having fun. I think he knew he wasn’t the kind of person who could just sit in an armchair and watch TV for the rest of his life.
If you’re passionately engaged with your role in the family business, you can’t expect to drop everything and walk away into the abyss of retirement and feel good about it. It may not be possible to set a real retirement date and keep to it. Instead, what often happens in family business is that people retire and then continue to come back. They have an office in the building, and they come back and talk to the employees. That’s what they love to do. But that kind of behavior really undermines their successor and makes it almost impossible for the current leadership to take the company in a new direction.
Instead of keeping hold on the company by having a post-retirement office in the building, spend time before your transition to set yourself up for success. Cultivate a hobby. Find a way of maximizing your talents in a community that you love. Get on other family business boards, where you can have an impact and share your knowledge in a meaningful way.
It takes two to have a good succession. The incumbent needs to do as much if not more preparation to be ready for their next phase of life, for stepping down from the significant leadership role that they’ve had in the company and the community.
The successor also needs to realize that they may even have a slightly easier job because they’re honing skills that they’ve already demonstrated or can cultivate. They may not need to develop skills identical to their predecessor in order to be successful. It’s a slightly more natural progression than trying to develop new skills that they may or may not have.