Usually when I talk with owners about the idea of passing down the family business, I’m met with several reactions. Uncertainty that the next generation can handle it. Apprehension that now isn’t the right time or the right situation. Fear that the business will fall apart.
You aren’t alone. And to be honest, the fear is understandable. According to the latest PWC Family Business Survey, 74% of family business owners plan to turn the business over to the next generation – but only 12% of family businesses make it to the third generation (from PWC).
Why is this transition so complex? Often it’s a matter of differing perspectives. There’s often “a complete disconnect between what the incumbent leader is privately planning and what the next generation is expecting.” (from PWC)
The key to seamless succession planning is understanding all perspectives, and working together toward a shared goal.
Understand your perspective
When the time is right, most family business owners do want to hand off the company to the next generation. But even so, more than half believe that in order to ensure a smooth transition, they’ll need to stay more involved than they’d like to.
This often creates what we call the “Sticky Baton” Syndrome. The Sticky Baton Syndrome is when in theory, the older generation hands over management – but in practice, they retain control over certain aspects, such as financials or HR. Why does this seem to happen? Most owners say it’s just hard to let go. And, it’s a fear of letting go. In the words of one owner, “I’m not sure the next generation has the dedication to put in the hours it takes.”
Understand the next generation’s perspective
The upcoming generation’s point of view is marked by a desire for change and growth. 86% of the next generation want to do something significant and special with the business. 80% have big ideas for change and growth. This is often what worries the current owner.
On the other side of things, most new business owners feel that gaining respect is one of their biggest challenges. 88% of next generation family business owners believe they have to work harder than their coworkers in order to gain their respect.
A seamless leadership transition will take time. And by time, I mean years. If you take the time to bridge the gap between how the owner of the family business sees things and how the next generation sees things, you’ll be in a better position to hand off responsibilities.
The key to overcoming differences is working together toward a common goal. There are several parts of your succession plan that you and the future leader of your business should work out together, including:
- Determining core values
- A future vision for the company
- Setting expectations