Whose job is it to take the lead in family business succession

Succession planning is one of the most crucial activities that any family-owned company undertakes.

Of course, there are several crunch points in a family company's life. Start-up is a dicey time for any business, and a vast majority of those that are launched hit the pad again nose-first not too much later. Then there's the growth leap, the point when the business expands beyond the family-style organization, management systems and controls of its early years. If the business can't adjust to the demands of increased volume and complexity, it can fold under the weight of its own success.

Another major crunch point is the period when decisions about continuity under family ownership and management are made. It's hard to overstate the importance of planning and executing the actions that ensure that continuity.

Succession planning is the key to maintaining the family's ownership of the business with minimal tax exposure and risk to the firm's stability. It's the key to a smooth transfer of management authority and responsibility from one generation to the next. And succession planning is the key to a comfortable and rewarding retirement for the senior owners who have spent their working lives building their family's financial security.

So with all that's at stake, who's responsible for focusing the family's attention on succession issues, setting up the schedule and mobilizing resources, securing professional help when it's needed, and guiding the process to a successful conclusion? The senior owner? The rising successor, or successors? Other concerned members of the family? Loyal longtime employees who know that successful succession is necessary for the company's ongoing health?

The answer is all of the above. If the business is larger than a classic mom `n pop, activating and following through with succession planning involves all the major actors in one way or another, at one time or another. It's especially important that key family members see eye to eye on several key points right up front. The senior owners, the rising generation and other family members who hold stock, or hold a stake (not always the same thing), in the company must agree on the following:

* The family wants to retain ownership of the business after the founding, or current senior, owners step down from executive leadership.

* The business is stable and profitable enough and its future in the marketplace is bright enough to justify keeping family ownership into the next generation.

* The rising generation includes people with the basic qualifications and commitment to run the company successfully.

* All key family members are ready to undertake a systematic process of analytical assessment, planning and transfer that may take years to complete and call for some very tough choices.

* The senior owners are prepared to manage in a business-like fashion a succession planning and transition process that will ultimately result in their handing over leadership and letting go of decision-making authority.

* The rising generation and prospective successors recognize that an important obligation of the business will be to provide a financially comfortable retirement for those who are stepping down.

* All family members agree that preserving the business as a healthy, growing enterprise with a solid foundation and a bright future into the next generation and beyond takes precedence over all personal wishes of family members. When a business owning family comes to terms on those key points, then a good groundwork has been laid and succession planning can begin, with much better than average prospects for success.

Q & A

Q: Several years ago, my son and daughter decided not to come into the business my father passed along to me. So I brought my sister's son in with the idea that eventually he'd take over and keep the company in the family. My nephew is smart and a real producer, but I have this growing suspicion that he's looking for some way to push me out of my own company. How can I find out what he's thinking about?

A: Ask him. Families in business can create unnecessary grief for themselves by just not talking to one another. If you have a succession plan in place, set aside a few hours to review it with your nephew. Ask him directly if he's still happy with the plan and the progress you're both making toward succession.

If you don't have a succession plan, the process of developing one will give everyone a chance to lay out their expectations and ambitions. In either case, your company should have ownership, policies and procedures so clearly documented in writing that a power grab isn't even remotely possible.

Q: My brother and I have worked in our family's company for more than 15 years, and we've just completed our first year as co- directors in full control. Our parents did a wonderful job of encouraging us, training us and bringing us smoothly into the leadership of this business. How can we let our mom and dad know how much we appreciate all they've done?

A: I suggest a big family get-together to recognize and thank your parents. After all, their prime motivation for all that planning and hard work was a dream of making the family's future secure. Do a "this is your life" review of their years together in the business, the major ups and downs, how they brought their dream to reality. Make a real production of the party, with a caterer, a photographer and all the family members you can round up. Invite some of the company's longtime senior employees, too. Saying thank you to your parents is a great idea, and you should do it in grand style.

James Lea, a professor at the University of North Carolina at Chapel Hill, is author of Keeping It In the Family: Successful Succession of the Family Business.

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