With each installment of our Video Blog Friday’s Series, Paul Karofsky reflects on influential lessons learned from his career working with family businesses. Each Friday, we will provide a new story with a unique topic – so stay tuned! We hope you enjoy the 15th where as Alan starts his estate and succession planning, his wife’s previously silent desire for a role in the business comes to the fore.
Alan (husband): Since all the Company’s stock is still in my name, I think it’s time to revise my will and do some succession planning. I want to know that you will be properly taken care of if anything happens to me. I also want to be sure that the business can continue.
Sarah (wife): That makes sense.
Alan: Since you’ve never been involved with the business and Roger is our only child working with me, it’s only logical for him to take over the ownership.
Sarah: Oh…
Alan: And he can pay you a salary for consulting, or whatever, and we can care take of the other kids with the insurance policies.
Sarah: That’s not exactly how I saw it. I was thinking about a role in the business for myself, something where I could make a meaningful contribution.
Alan: Oh…
Alan reflects on what just happened. “I didn’t think that my wife would ever want to work in the business. She never seemed to show any real interest before. What could she do? I’ve always assumed Roger would take over. I can’t imagine him ever working for his mother. What would happen to the business? I’m fifty-five years old; I know I have to address this.”
Sarah reflects as well. “I’ve always wanted a role in the business, but Alan’s style had always been so strong that I backed off to avoid a confrontation. But if something happened to him, I would want some involvement with the business, maybe on an advisory level, not just to ensure my financial future, but because I have always found it interesting even from the sidelines. Besides, I don’t like the idea of being dependent on my son.”
What’s going on…
Alan, in his desire to plan for the future, has a clear idea of how things ought to be. His priorities are to meet for Sarah’s financial needs and preserve the operation of the business, while providing for children not working in the business with other assets. After sharing his plans with Sarah, Alan has just learned that his first two goals have consequences. Alan is surprised to hear of Sarah’s previously silent desire for involvement in the business. He is now feeling a new anxiety about the future, both for Sarah’s desire for a role in the business, and for the impact this might have on their son, Roger, and on the business.
Sarah is expressing the still silent desire of many wives of powerful husbands who adopted traditional lifestyles a generation or two ago. Contemporary life has freed women to consider options beyond the household even into the previously sacrosanct domains of their husbands. Sarah believes that if Alan were no longer able to work in the business, it might be her turn to make a contribution, not necessarily in management, but at least sufficient to fulfill her needs and maintain her independence.
What to do…
- Alan and Sarah would benefit from a review of what brought them to their present state. If they can understand how they came to their current assumptions and expectations, each will gain a clearer insight into the previously unspoken desires of the other.
- Since Alan is the sole business owner, the ultimate decision making authority is his. Nevertheless, he would benefit from gaining the support of Sarah and Roger by involving them in the “process” of succession planning.
- In developing their plan, Alan, Roger and Sarah need to consider a variety of business and family issues.
- An effective beginning is a review of the current roles for Alan, Roger and Sarah. This should be part of their strategic planning, leading to redefined roles and the exploration of a Board of Advisors.
- With strategic plan in hand, Alan and Sarah should meet with legal and financial advisors to explore options for ownership transfer, including who, when and how.
- Also, based on the strategic plan, the family can establish criteria required for proper leadership of the business into the next generation. Candidates, including family members, can be measured against those criteria. Decisions can be made and skill/knowledge training plans developed to ensure the proper match of talent with the needs of the business.
- Alan and Sarah now focus on estate planning. Working with their attorney and accountant, they can consider the needs of Sarah, Roger, and other children not working in the business.
As Alan, Roger and Sarah go through this process, the distinct roles of ownership, governance and management will also become clearer. All three can be structured to balance the requirements of the business with the varying needs of family members. When finally voiced, the silent assumptions of husbands and wives might carry some surprises, but working the issues in a methodical fashion can simplify the process.
Paul Karofsky is Founder/CEO of Transition Consulting Group, Ltd. He was third generation CEO of his family’s business and is a former monthly columnist for BusinessWeek Online and former case study editor of Nation’s Business and Families in Business. The recipient of multiple awards and honors, Paul holds a certificate in Family Business Advising from FFI with Fellow Status and has been consulting to family enterprises for over 25 years. Paul can be reached at [email protected] or 561.626.1110
