Recently, DWT’s Family Business Group sponsored a day-long workshop on Succession Planning featuring Professor Ivan Lansberg from Northwestern University’s Kellogg School of Management. Professor Lansberg is one of the world leaders on succession and continuity planning for family-owned businesses.
The workshop focused on transitioning to sibling and cousin generations. Here are some of the most important takeaways:
- SUCCESSION PLANNING SHOULD START EARLY AND BE LEAD BY THE JUNIORS.We all know that the best transitions involve a process, not an event (such as death). Too often, the controlling owners die on the job – still controlling family, ownership and management decisions. While this may be really hard medicine to swallow, the controlling owners should let the junior generation led the succession process – after all, it is they who will have to live with the consequences.
- GOVERNANCE, GOVERNANCE, GOVERNANCE.The need for clear governance standards becomes more critical with each successive generation. The communication, management and governance styles that worked for the controlling owner of the first generation will not work in the sibling partnership of the second generation. The diversity of perspectives in the cousin consortium of the third generation mandates careful work to develop clear governance processes, often including a family assembly, a family council and a board of directors with one or more members from outside of the family and the business.
- START NOW.We have all seen the dismal success rates for multi-generational businesses. Less than 10% of family-owned businesses survive into the third generation. Professor Lansberg noted that these failures are primarily due to “family” issues, not “business’ issues. For legacy businesses that intend to span generations, it is never too early to start discussing the plan to ensure continuity for the business and its family stakeholders. Please contact us to learn how to start this process.
More information on Professor Lansberg can be found at www.lgassoc.com