Should Family Business Succession Plans Include The Family?
It seems that over the last few years, large successful family businesses have started developing programs to pull family members back into the business. Perhaps this was triggered by the recession and subsequent jobless recovery, and maybe this was going to happen anyway, but certainly is happening.
This is interesting because, for generations, family businesses have typically discouraged family members from entering the business due to the unique business relationship challenges that family businesses are forced to deal with. In their efforts to ensure that only qualified members of the family enter the business, they have effectively de-motivated members of the family from having an interest in the family business at all.
Like any business, strong management is a key ingredient of a successful, established family business. Businesses grow, the owner(s) want out, and they execute an exit strategy to do so. Thriving beyond one generation in a family business, though, is not an exit strategy. Instead of an exit strategy, multi-generational family businesses want the family to keep drawing benefits from the business by passing it down from generation to generation. For this to happen, the family business needs to maintain the younger owner’s interest and engage them in the business.
A good way to engage the younger generation is to develop and offer family business 0rientation programs. Helping them learn about the business and the heritage of the family in the business will increase the chances that the most qualified family members will choose to participate. Their passion may be sparked by simply gaining a better understanding of how the whole thing happened.
Whether the family members decide to participate or not, the business will benefit from well-educated owners who appreciate the business and may one day hold an important role on the board of directors or family council.
Developing a comprehensive family business orientation program and presenting it to all the family members as a part of the succession plan is good business, and it is actually fun for the family to see how it all initially came together.
Have a question about family business law or succession planning? Contact us, we can help.
– Peter Muzinich