Tag Archives: transition

01/20/17

Transition, Transition—How Goes the Transition?

Family businesses offer a unique opportunity to examine what it takes to transition from the entrepreneurial mindset of the founder to that of an established and complex enterprise. The oldest form of business, family firms represent the majority of businesses worldwide. Given that they are ubiquitous, one might assume their best practices are well understood. Yet most fail by the third generation.

One reason for family-business failure may be embedded in their very beginnings. While the founding entrepreneur’s decision to start a business may be intentional, the transition to becoming a family business may be less intention than something that ‘just happens.’ The entrepreneur starts a business, gets married and at some point has children. The children may get taken to work by a parent struggling to balance life and work issues. At some point the children start helping out, providing inexpensive labor, and ‘willy-nilly,’ learning the workings of the business.

Over time one of the children assumes a greater role in the business, eventually beginning to make important decisions. Another child may enter the business simply because there is a job opportunity. A natural hierarchy develops as the business calls forth and accommodates the capacities of each of the siblings.

As the children’s capabilities increase, the entrepreneurial founder spends less and less time working the business, and one day decides it’s time to retire. The children inherit the business with the condition and promise that their parents will be taken care of. A simple, straightforward transition has taken place.

Typically these grown children of the founder will marry and have children who become the family’s third generation. And here lies a critical family-business turning point.

When the time comes for this third generation to inherit ownership and control of the business, their parents look back at the transition model that functioned when they inherited. And it is found wanting. By now things have become significantly more complex. Not just siblings anymore; cousins are now involved. A new model of inheritance, role distribution and governance must be found.

Understanding this inevitable pattern is the first step toward a successful transition from entrepreneurial to multi-generational-family-business success.

12/25/16

The Longest Night

The Longest Night

The sun is disappearing… we must bring it back.

Throughout parts of the globe where the seasons change people have been observing the winter solstice for millennia—imploring the sunlight to return and celebrating its readiness to do so.

I find myself writing this blog on the evening of December 21st—the winter solstice—the longest night of the year. Images of families come to mind—the elders and the young ones.

On winter solstices past, members of the Iroquois Nations went to sleep early to invite “the dreaming” where visions would instruct their lives for the following year.Iroquois Nations

The darkness of this night, open to interpretation, inspired many different traditions and rituals. Ancient Mongolians entered a mystical tent that represented the world, where their shaman undertook a spiritual journey to the North Star to clean their souls of sins. In ancient Rome the people honored the God Saturn with the weeklong feast of Saturnalia. With the return of the light many cultures celebrated the rebirth of a God, and from these traditions the holiday of Christmas was derived.

Modern astronomy has revealed that the sun does not disappear…that the cycle of the seasons is due to the earth’s axial tilt. But the psychology and emotional impact associated with the winter solstice has not changed. We shrink from the darkness, the winter cold, and gather our families and communities to call back the light and warmth. 

As citizens of the earth, cycles and our responses to them are built into our DNA. Everything about our lives is cyclical, and that applies to family businesses no less than individuals. To them as well comes an inevitable time of change; a time that calls for the transition of leadership to the next generation, and the next. Here too, such a transition is open to interpretation. How will the family see this change? As an end, and frightening? As a beginning, and hopeful?

A family business, guided by the light and warmth of its incumbent leadership may struggle with their vision as that light wanes. And just as the sun when it dips below the horizon is not really gone, the wisdom and perspective of the founding generations continues to influence future ones.

Light endures.

10/22/15

Differences and Consensus

In his October 4, 2015, NY Times column “Corner Office” Adam Bryant presented his interview with Gary B. Smith, CEO of the Ciena Corporation: “Gary Smith of Ciena: Build a Culture on Trust and Respect.” In it Smith shares some of his history, his early influences and how his views changed with experience. In last week’s blog I wrote about Smith’s understanding that “it’s all about people.”

 And of course, with people there will be inevitable differences of opinion. Smith says that this is healthy. These differences should exist. But ideally, he aims at consensus. “I’m a great believer in getting consensus,” he says. But he knows that consensus cannot always be reached, so “you’ve got to say, O.K., that’s good enough.”

What’s critical he says, is that once agreement has been reached the leadership team must be synchronized and the agreement is communicated down the ranks of the organization so that all are moving in the same direction.

One of my first clients started our engagement by stating: “My dad has fired me twice.”

The point of contention was over my client’s approach for implementing a strategy. His father would neither acknowledge nor respect his son’s difference of opinion saying: “any way you do it is ok, as long as it’s my way.” Clearly there was no working toward a consensus.

Perhaps for the health of the organization it might have been easier, in the short run, for the father to fire his son, thus avoiding having the operation of the business skewed by trying to follow two conflicting directions. But for multi-generational longevity, an opening must exist, for at least a partial consensus.

To ensure multi-generational success, members of the next-generation need to be granted a degree of autonomy, allowing them to acquire leadership skills and giving them the invaluable opportunity to learn from their own mistakes.

Handling this transition is one of the most difficult challenges facing family businesses.