Seth Godin recently wrote a blog post titled, “Two heads or one?”  (http://sethgodin.typepad.com/seths_blog/2015/04/two-heads-or-one.html)

The blog is based on the question of whether there is an inevitable split in a business as it grows, between the people who design products and those who market them. Godin points out the benefit of having one person successfully taking charge of both roles. He ends by saying: “There are a lot of reasons that this is quite difficult to pull off. That doesn’t mean it isn’t important.”

Though Godin was expressing a slightly different perspective, the question shows up for many family businesses as they consider succession in leadership. For example, there are two siblings or cousins both qualified to lead the business, who also bring different skills and experiences to the table. To answer the question the family must consider their goals for succession and the qualifications of each prospective successor.

It cannot be assumed that the interests, strengths, and abilities of the next generation are identical to those of the current generation of leaders, or that the attributes required to launch a business are the same as those required for growing and managing it.

It is incumbent upon both current and next generation leadership to recognize that succeeding heirs of the business need to provide a vision that rejuvenates the business and ensures that it will be competitive in the next generation.

Samuel Johnson III, former Chairman of SC Johnson, made the statement that every generation has the responsibility of bringing their own vision for the future of the business.

Imagine if when envisioning the future of my family’s business I started was buggy whips, or floppy disks. Where would that take the business? What I want to see carried forward are our values, those things that are important to us as a family. Values are the foundation upon which a vision is built. They are the enduring bedrock.

To provide perspective I often reference Joan of Arc. Her mission, her battle cry was, “to free France.” Her underlying vision; “a free France.” Her grounding value; “freedom.”

A family enterprise is a system, and one cannot look at it without taking into account the performance of its individual subsystems–the business, the ownership, and the family–for the behavior of any one part of the system will influence and be influenced by the others.

The fate of each of the subsystems is intertwined. It is necessary to understand that these strands may not be disentangled without seriously disrupting one or all parts of the system.

–adapted from Kepner, E. (1991), The Family and the Firm: A Coevolutionary Perspective. Family Business Review, 4: 445–461. doi: 10.1111/j.1741-6248.1991.00445.x

http://onlinelibrary.wiley.com/doi/10.1111/j.1741-6248.1991.00445.x/abstract

In its online “Insights and Publications Section” McKinsey & Co. recently published an article subtitled “What will it take to shift markets and companies away from a short-term way of thinking” with excerpts from “Perspectives on the long term,” a book of essays contributed by leading executives and academics. In the article, the issue of shifting from “quarterly capitalism” to longer-term thinking is called out as being “particularly essential.” http://www.mckinsey.com/Insights/Leading_in_the_21st_century/Perspectives_on_the_long_term?cid=other-eml-alt-mkq-mck-oth-1503.

Many multi-generational family businesses have proven successful in thinking long-term. Family Business Magazine has listed 100 of the world’s oldest. http://www.griequity.com/resources/industryandissues/familybusiness/oldestinworld.html

The youngest of these, Laird & Co., a New Jersey-based brandy distiller, was founded in 1780. The oldest, Kongo Gumi, is a Japanese construction company that built the Buddhist Shitennoji Temple in Korea 1400 years ago. It was founded in 578 and is in its 40^th generation.

A critical factor in this kind of success is an “intention” that the family continue to own and operate their business for many generations. A “best-practice” of this long-term thinking is often initiated by considering what the family and the business should be like when the grandchildren assume leadership.

This illustrates that what the McKinsey article states as requiring “wide-ranging shifts in both mind-set and practice” is in fact a way of thinking that has governed the operation of family-owned business for centuries…”ahead of the curve.”

While reading a recent blog post by Seth Godin, entitled “Sorry Confusion,” http://sethgodin.typepad.com/seths_blog/2015/03/sorry-confusion.html, I was reminded of a meeting with a business owner who was planning to retire. At that time he was pondering whether he should sell the business to his employees or to a third party. But internally what he was struggling with were two children who were not speaking with each other; a son-in-law working in the business who did not have the skills to actually run the business; a non-family manager who to a large degree was running the business but did not have resources to buy it. He also had grandchildren who, from his perspective, were too young to be considered for anything. His thinking and plans at that moment did not include any of his family.

One of the sorry things about this situation is opportunities being missed. By his thoughtlessness with regard to his family members and existing family dynamics–conjuring “escape plans” rather than face them–the businessman has willfully blinded himself to every possible resource, every possible talent, that one or more of his family members might contribute to bring the family business into the next generation.

The time for transition in your family business is approaching. Succession is at hand, and the new generation is poised to take the reins…

If you are anything like me, you will have thoughts, and even concerns, about what your life will be like after you relinquish control of your business and begin the process of a personal transition. You may find yourself asking “What’s next?” What role will I play going forward?”

While most of us will have many productive years following transition, for many there will be a strong sense of loss. At times we may find ourselves facing a kind of vacuum as we come to realize what we don’t have anymore.

From person to person, responses to this crisis differ. Some lament this changed relationship, expressed in statements like “it’s hard getting older.” Others embrace a more positive outlook, variously regarding “getting older” as a curiosity, an awe-inspiring process, a new challenge.

In a recent OpEd article for the New York Times, Oliver Sachs wrote about his diagnosis of terminal cancer and his perspective on the future, stating that he now wanted to live in the richest, deepest, most productive way he can. (http://www.nytimes.com/2015/02/19/opinion/oliver-sacks-on-learning-he-has-terminal-cancer.html)

Perhaps akin to being at the top of a roller coaster or setting off on a downhill ski run, letting go is difficult. Certainly there are things I have enjoyed that I can’t do anymore, but this fact does not take anything important away from who I am now.

The ending of years of leadership in the family business is also a new beginning. It is a different beginning than that of youth, and daunting in different ways. But seen in a truly justifiable positive light, this start holds an earned advantage–a worldview and wisdom gained from experience; an equanimity and balance achieved by facing both triumph and disaster and coming through. Many traditional cultures have respected and asked guidance of their elders for just these reasons.

Given the know-how and inner solidity acquired over years of effort, the personal transition of building a newly significant life as an “elder” can perhaps be seen as a truly worthy challenge.

Talking About the Family in the Context of the Family Business but Not About the Business

The dining room table in my childhood home was the place for family meetings. That’s where I learned some of “what it means” to have your own business. Undertaken in a more structured way, family meetings are the place where policies get established. It’s where family members learn about the rights and responsibilities that accompany being a business owner and part of a family business. As family businesses develop, family meetings provide the forum for delivering information to stakeholders, whether working in the family business or not, about the state of the business, its financial performance and plans for future growth.

A well-structured family meeting is worth its weight in gold; done poorly it turns to lead.

According to business exit strategist Andrew Karlen http://www.karlenstolzar.com/karlen.html, business valuation is an important place to start when thinking about transition in family business.

Passing a family business from one generation to the next, rather than through sale to a third-party does not diminish the benefit of or need for a comprehensive valuation.

Not all businesses take steps to get this done. But there are critical consequences for avoiding this important work.

A determination of value:

• Establishes your starting line and distance to the finish
• Tests your exit objectives
• Gives owners a litmus test

When you know how much value there is, you know how much you need to create to achieve your objectives. You then know where you need to concentrate your time and effort

In his white paper, Opening Pandora’s Box–10 Rules for Talking to Kids About Money, Glen Kurlander, Managing Director of Wealth Management at Morgan Stanley, advises affluent parents: “you have got to come to grips with your own values about wealth before you discuss money and wealth with your kids.

https://www.morganstanley.com/wealth/wealthplanning/pdfs/talktokidsaboutmoney.pdf