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 23rd feature in our series, Leadership succession… whose call is it? where Father and daughter debate over who should make the decision around future leadership of the family business. Dad wants his children to decide and they think he’s “copping out” in fear that those not selected will be very angry at him.
Ed: You kids have got to make some choices. If you can’t decide who’s going to run the business, I’m sure not going to do it for you.
Lilly: But Dad, there are three of us who have worked here for several years. We all think we could do the job. I think it’s going to be pretty tough for us to decide.
Ed: If you and your brother and sister can’t decide that, how are you ever going to be able to run the business? Maybe I need to look for a non-family CEO.
Ed thinks to himself, “I thought these kids were pretty good decision makers, but they sure are leaning on me for this one. I know the text book says that as CEO it’s my responsibility to pick a successor. But in a family business it’s not that easy. They’re all good kids. I think they’re all pretty capable. But I also think that if I make the decision and it doesn’t work out, then I will have been running the business from the grave. I don’t want to impose decisions on my children that may not be right for them. If they are the ones who have to live with a decision, I think they are the ones who have to make it.
Lilly reflects, “Dad’s leaving us to clean up his laundry. He’s afraid to make a decision because he doesn’t want to risk that two of his children might be angry with him for not selecting them. So that puts the burden on us. We have to be the bad guys and hurt two of our siblings and then continue to run the business together. How will that be possible? We’re in a lose-lose situation.”
What’s going on…
Most of the family business literature argues that it’s the responsibility of the senior generation member to select his or her successor leader. But often times that’s not the way the CEO wants it to work. While daughter, Lilly, thinks Dad is “copping out” in his refusal to make the decision, Dad is convinced that it’s in his children’s longer term best interest that they are the ones who struggle with this issue and bring it to resolution. After all, he believes, they are the ones who will have to live with it. His thinking is supported by business management theory that argues that decisions are most effective when the ones who have to implement them are part of the decision-making process. But as Lilly sees it, she and her siblings are going to have a hard time accepting not only the process that they must be the decision makers, but also the perceived consequence that two will “lose out.”
If we accept Dad’s words at face value, then implicit in his position is the confidence that his children can effectively make this decision and effectively run the business in the future. So the burden now becomes that of his children. Why are they reluctant to make the decision themselves? Is it a fear that two will be “left out?” Why do they assume that there must be “one” leader? Must there be not only one leader, but one leader “for life?”
What to do…
- Dad and his children need to sit down and clarify their preconceived ideas about why each other thinks the way he/she does.
- While dad is still calling the shots and he wants the leadership succession decision to be made by his children, he can help them and even participate with a “process.” Perhaps the counsel of an Advisory Board is in order.
- All the key stakeholders need to gain a clear understanding of just what it is that Dad does. What are his specific roles and responsibilities?
- The future direction of the business must be defined. Beginning with a shared vision and strategic posture, the family and the business will have a clearer sense of the knowledge, skills and experience required of the next leader(s). Criteria for leadership can be established.
- Potential leaders must be assessed. Their strengths, limitations, likes and dislikes must be matched to the future business needs.
- Career development planning follows. Candidates build action plans which detail the specific training that they will undertake.
- Benchmarks can be set, so there will be a certain measure of performance to training goals.
- Family members must engage in a process to decide “how to decide” about future leadership. This includes the exploration of different models. Co-leaders, multiple leaders, non-family CEOs, and interim non-family CEOs are increasingly common options.
Parents and children can have very different ideas, not only about the future of the business but about how decisions around the future get made. Parents and children also have their own perceptions of why the others think the way they do. Family businesses can run more effectively when family members drop their preconceived ideas about each other, get down to the business of understanding where others are really coming from and stretch their own imaginations to explore new options for the future.
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
