The majority of the businesses that move into the second and even third generations of family ownership don't make it. Statistics bear that out. However, the reasons for failure don't always stem from the quality (or lack thereof) of the product or service. Your business may hold significant market share in your region, but what you possess in strong sales you may lack in intergenerational communication. And that can spell trouble during times of transition.
As I mentioned last month, parents that pass on businesses to their kids sometimes fail to prepare them for the reality of being at the helm. Whether it's a lack of grooming or being overprotective of the business to the point where growth may hinder the retiring owner's buyout, there are conflicts that arise in every scenario. Only business owners with the foresight to steer clear of these conflicts are built for survival and success.
RELINKING CHAINS OF COMMAND
Joey Tassin has been president of Sabine Aquatech Pools & Spas, a four-store operation based in Lake Charles, La., since 1999, when his father and Sabine founder Houston Tassin retired. But it's not like Joey didn't earn the title.
He started working for his father in 1980 at the age of 15 but by 25, Joey knew his career path lay at Sabine. "It had been a given that my brothers and I would take over the business," says Joey, recalling a date approximately 15 years ago when Houston revealed his long-range plans for his boys, including Joey's younger brothers Dean and David, who handle the roles of production manager and sales manager, respectively.
Although Joey had worked for his father the longest, each brother had slowly built up a defined set of responsibilities. Yet once Houston retired, his roles were distributed among the brothers, leaving some crossed wires among employees and management alike.
"When [my father] was running the business, he would ultimately answer any questions that couldn't be answered," says Joey. "When he left the company, his former direct reports didn't get passed to the right person. He did a great job passing us the company, but it wasn't extremely clear where the answers were going to come from for about a year."
By going from one to basically three bosses, Sabine's chain of command simply needed to be adjusted to fit the new era. "Now if someone has a question, they go to their superior," says Joey. "It's the classic management style. Of course, I'll hear out any question, but usually my first response is, 'What did Dean or David say.Ć
KNOW WHEN TO PULL THE PLUG
Retirement is both a mental and physical act. As the calendar turns, owners begin to realize that their hard work needs to pay off soon in the form of retirement. But how quickly are hands-on owners ready to let go of their "first" child, i.e., the family business?
Take the Wolters of Wolter Pool Co., in Beloit, Wis. Russell and Patricia Wolter have been running their store since 1965. Now, with Russ at 71 and Pat about to turn 65, the couple has been considering their succession plan for about five years.
The Wolters are thoughtful enough to embrace the idea of retirement, but are shrewd enough to admit what needs to be shored up before they begin taking 12-month vacations. Daughter Kim Wolters is their obvious choice to run the store operation, and according to Pat, only needs to brush up on her bookkeeping skills to round out her store leadership. The installation part of the business is what concerns Pat. Ever since Russell put a pool in their backyard nearly 40 years ago, he's been supervising his company's installs. "It's not easy to find someone who works like Russell," explains Pat. "And it's important to have two people running this business once we leave ā one to run the store and the other to supervise the installations. That's really the only way to run this company."
Pat admits that Kim is likely going to take over the business, but Pat understands where her daughter's hesitations lie. "She's read the statistics about family businesses failing beyond second and third generations. Plus, it's easy to run the company when Mom and Dad are around because they can always help you make the major decisions. During the slow periods of our business, Kim would run the store and it was harder to reach us if she really needed us to help her out."
While the Wolters truly have their heart and soul in their company, they also have recognized what needs to happen in order for their daughter ā and their future installation chief ā to succeed as the next owners.
LEARN TO FLY . . . QUICKLY
One sure way to stifle growth following a transition is for the new owners to allow their parents to halfway retain their positions, whether out of pity or simply because they haven't come to grips with their new responsibilities.
When Houston Tassin retired from Sabine, he didn't prolong the agony. According to Joey, he was there one day and gone the next: "He really surprised us when he retired. He backed out completely until we called him to help. He's still our consultant but he doesn't come around the stores."
Tassin credits his father with "progressive thinking." He realized that what his sons were about to embark upon was nothing he had ever experienced, and he knew that his post-owner interceding would, in effect, "kill his own retirement." (For the record, the Tassin sons recently completed the five-year buyout of their father, while Sabine still pays Houston a company pension.)
LEARNING TO FLY . . . GRADUALLY
Of course, the presence of the former owner might be comforting to the new owners, especially if they're still learning the ropes. Kim Wolter has established her niche in the front of the store over the past 15 years, greeting customers by name and offering the service her customers expect. She has known for at least a decade that she could eventually assume store operations, but if Kim is to take over, that means spending more time in the office handling the phones and books, and less time in the front of the store.
For Kim, delegating her current authority while assuming new responsibilities would be made easier if her parents were available to help catch her mistakes.
"I've talked with other [second-generation] owners who've gone through quick transitions," Kim says. "You don't really realize what the parents [would do] in certain situations until the ball drops in your court. It'd be nice to be allowed to make mistakes; let you run until you head down a bad alley when your parents would help you find a solution."
Different families require different transition dynamics. For the senior owners, understanding your children's confidence and competence can help you determine your own exit strategy. For the eventual owners, keeping your parents informed of your comfort level will help your own ascension.
