Otis Baskin, a consultant of the Family Business Consulting Group, recently authored a post in Family Business Magazine, reiterating the importance or preparation and planning in family business success. Mr. Baskin coined a new term, however, to describe that not-uncommon state of the unprepared family business facing succession issues: “transition shock.” Transition shock is really a family and/or business back on its heels because it had wrongly assumed that business succession would follow naturally from business success.
Most advisors and veterans of the family business community will say that the key to avoiding this is communication within the family. Mr. Baskin correctly observed, however, that while communication within the family is an absolute prerequisite to avoiding transition shock, it is not sufficient. As he astutely observes: "communication is not a business plan." The central figures of a family business need to align expectations on how the roles of the different individuals will change in a succession and how their status within the business and the family will be affected. They further need to provide a roadmap and a timetable for what will happen and when. Finally, they need to agree on accountability on all commitments.
Many families need some guidance on how to have these discussions and what communication they should have to avoid transition shock. This is where the services of Mr. Baskin or other family business advisors can be valuable. A little facilitation of these conversations and a little guidance can help prepare a family business for the challenges and excitement of a successful generational transfer.
Read Mr. Baskin’s full article here.
Drew Steen is a business transactions attorney at Davis Wright Tremaine, LLP. He represents both buy-side and sell-side clients in mergers and acquisitions, venture capital investments, joint ventures, equity co-investments and restructurings. He also serves as regular corporate counsel for several closely-held and family-owned companies. Drew can be reached via email at firstname.lastname@example.org or directly at 206.757.8081