One of the skills I've had to hone as a family business succession planner is being able to read between the lines. That even goes for my own column. Last month, members of the Wolter family, who own Wolter Pool Co., in Beloit, Wis., offered some poignant insight into the issues they face in transferring the business to the next generation. Once I reread the column in print, I realized that Patricia and Kim Wolter each expressed classic reservations about family business transition, proving that, while it's normal to feel apprehensive about letting go and about assuming responsibility, it's critical that both parties keep communication lines open.
IS SHE READY AND ABLE?
Kim acknowledged that while she worked at Wolter for 15 years, it was nice having her parents around to pull her out of any tough spots. Her parents also recognized her reliance on their expertise and as a result are bringing Kim into the fray slowly but surely. Many business owners can comfortably conclude that 15 years of hands-on experience is a more than adequate training period. But the operative concept here is "hands on."
Ideally, the successor will, for all practical purposes, be running the company well before the senior owners' official departure date. It's likely that at some point, the senior owners will shift their focus from the future of the company to their future retirement. So it's important that the successor be proactive in making his or her concerns known before being nudged out of the nest.
For instance, what will the new owner do if an installation crew fails to show at a job during a critical juncture in the construction process, and at the same time the store is short-staffed? Hopefully, the successor has signed on the senior owners as consultants to the business. Their role isn't to solve any new problems, but to support or amend the decision the new owner makes.
Not only can the former owners move into retirement, but the new owner can experience the entrepreneurial "sink-or-swim" environment without necessarily hitting the bottom.
A more dangerous scenario is the senior owner that doesn't feel his or her protege is adequately prepared and hangs onto the business too long.
This is where many family businesses experience communication breakdowns. First of all, is the senior owner correct in his assumptions that his kid isn't ready to run the business? Perhaps the kid screwed up just two days ago and the sour taste from that lingers in his craw. Is that enough reason to hold up transition? Failure is a great teacher, provided that the protege doesn't continually fail the same lesson. Perhaps the kid took on a project and executed it well, but the company didn't benefit from it. The fact that he completed each step successfully means more than if the kid screwed up the project but got lucky with the results.
If you're the owner, assign some criteria to your successor and see if he or she can meet them. If execution is more important than results, don't simply judge his or her abilities on results. If you believe in results only, judge him or her on the bottom line. Then make your decision based on accomplishment and communication.
GET IT IN WRITING
Kim Wolters accepts the fact that she is going to take over and knows that eventually, those uneasy decisions will be all hers. In most companies, 15 years of grooming is usually a solid indicator that the company will pass into that child's hands. But nothing is written in stone.
For example, what happens if a son is five weeks from assuming control of the company and the parents are offended by their son's recent behavior and decide to pull the plug on the deal?
To make a transition binding, both sides need to draft an agreement well before the transition, but at a time when the senior owners know their tenure in the business is ending. As I mentioned in a previous column, this agreement should only be necessary when times are bad. This agreement can prevent a change of heart and facilitate the transfer in a timely manner. Of course, neither party expects the transfer to hinge on that piece of paper, especially when family is involved. But that's the point of a binding agreement.
AM I READY AND ABLE?
A successor's hesitation to take over a company could become disastrous if not identified and addressed early. Early means when the senior ownership starts thinking about retirement. Hopefully they will sit down with their protege and give them the "someday all this will be yours" speech. At that point, the successor is probably eager to jump into the role. But once he's tasted trial ownership, maybe things don't seem so sweet anymore.
Simply put, the successor can't dream his or her parents' dream. The successor can't treat the business like a start-up because it isn't, even though he or she is a first-time owner. He might be more risk averse because of the situation, but he needs to overcome these hesitations by dreaming his own dream and moving forward, independent of his parents' dream.
If that dream requires building a team around the successor to handle the responsibilities the new owner can't, so be it. Nobody should ask the new owner to shoulder a burden he or she isn't willing to handle. This is business, not prison.
Another possibility is that the parents instilled that hesitation. Did they ride their successor into a fear of failure? Hopefully not, but if they hear "I'm not ready," they should meet with everyone involved in the transition immediately and start hashing out the issues. If handled early enough, the worst-case scenario is that their preferred successor won't take over the business and they will have to find someone else to do the job. If the senior owners don't heed the warning signs, they run the risk of trying to hand off the ball with no one around to run with it.
What happens then. The senior owner is probably going to have to put off retirement a few more years. And there are few places more dangerous than the space between seniors and their retirement day.
